As for why it's appealing, I think it's an amalgamation fetish. Transformation is an obvious fetish it appeals to, but there's also
-Extreme dominance/Extreme submissal; either forcing another or allowing yourself to be rendered immobile and fully under the control of either another or your own body
-Waterplay/incontinence, tying into subs, in that a big part of many of these things is an inability to control your own bodily functions
-Mind break/conditioning/aphrodisiac, insofar as someone's being forced to feel good and enjoy what is otherwise a horrifying experience; no matter what their feelings otherwise, they can't help but feel it positive
-Gender bender, especially if consensual, in that it gives the same "oh wow this is what it feels like to have a cock/pussy", albiet turned up to eleven; again, if consensual, there's an implication that they'll be living life and gaining knowledge about how the other half lives.
-For the more sadistic (I'm not one of them), there can also be permanence/identity death/snuff put in there. I'm personally a fan of end results in TF that revert all parties and allow them to transform into something else again, ideally as a positive experience, but I don't doubt there are people out there who get off to the thought of fully taking someone else's freedom, both physically and mentally.
I get off on TF, particularly when the transformation is presented as orgasmic and not just a means to an end (like people who like full animal TFs, where the goal is to become that animal rather than for the subject to get off), and also kinda get off to situations where the subject is initially reluctant but ends up caving, so this fetish tends to be kinda tailor-made for me. It's the same feeling I get from trapformation, bimbofication and other increased sexualization based fetishes like hypnosis.