When installing Windows 95 for the first time, users were presented with a text interface instead of graphics. This decision was made by Microsoft’s engineers, who chose to recycle existing code rather than develop a new graphics setup application.
Raymond Chen, a Microsoft employee who worked on Windows evolution for over 30 years, explained that MS-DOS could handle graphics but its primitive approach and time-consuming nature made it unsuitable. The prompt-based operating system required programmers to manually implement graphical functions.
To meet the minimum requirements of a VGA video card, the setup program had to be rewritten from scratch. It needed to show dialog boxes with keyboard support for navigation, hotkeys for quick shortcuts, and support for ideogram-based alphabets like Japanese and Chinese.
The developers essentially wrote a new operating system just to start Windows 95 setup, which was unnecessary because Microsoft already sold the required product in the Windows 3.1 runtime. This approach allowed them to reuse existing code and achieve full support for extended memory through their protected mode manager.
Microsoft still uses this code-recycling approach today, installing a “miniature” operating system to bootstrap the setup process. This minimal OS environment is now known as the Windows Preinstallation Environment, used to repair Windows if something goes wrong with the OS itself.
Source: https://www.techspot.com/news/106813-windows-95-setup-text-based-good-reason-microsoft.html