Short answer: For the same reason that everything else at Trader Joe's is cheap. They're industrial agricultural products that are efficiently made and distributed.
The Internet got excited last week with the "news" from the Huffington Post that there are dead birds in Trader Joe's wines. The Huffington Post, which doesn't pay writers for most of its stories, exists mostly to prove that liberals are as gullible as conservatives. It got smacked down for running potentially libelous material and took the story off its site.
(Just to clarify: There are most likely no dead birds in Trader Joe's wine. There are, however, thousands of dead insects. More on that below.)
The question of Why are Trader Joe's wines so cheap? is still out there, so I'm going to answer it.
Wine is an agricultural product, like cheese or muffins. You can buy expensive individually baked muffins from a fancy bakery or you can buy them cheaply by the 12-pack at the supermarket. Wine is the same.
Let me point out that Trader Joe's wine, even Charles Shaw, isn't really that cheap. Charles Shaw sells for $2.50 for a 750 ml bottle. Alcoholic grandmas would never pay that much for wine. You can get a 5-liter box of wine for $10 in most supermarkets; that's $1.50 for 750 ml. In fact, this is more than much of the wine-producing world pays for its cheapest wines, because labor, transportation costs and alcohol taxes are higher in the US than in other places.
The wines at Trader Joe's are made in large quantities by wineries as cheaply as they can. There is nothing bad about this, any more than there is something bad about making muffins by the dozen. They get the cheapest grapes they can, either growing them themselves or buying them on the bulk market. They ferment them in big tanks. It's very hygienic. I've been to a lot of big industrial wineries and they are much cleaner than factories that make other kinds of food.
I wasn't kidding about the insects, though: some of them fall with the grapes into bins when they are harvested and cannot escape before the grapes are crushed. (There's a technical term: MOG, or "material other than grapes.") This shouldn't be surprising, because insects are in all of your supermarket food. Lots of insects.
Wine is less gross because those grapes are blasted with SO2, fermented and turned into alcohol after the insects get in. Any insect residue is a chemical memory, and there aren't any solids because these wines are filtered. This is not the case with insects in peanut butter. But we're talking about wine.
Trader Joe's works with large wine companies like Bronco, which makes Charles Shaw, to make wines specifically for its stores. That's why you won't find most of its wines in other stores. This reduces distribution and marketing costs, which add several dollars to the price of every bottle in most wine shops.
In short, Trader Joe's wines are cheap because they're made and distributed efficiently. Like their other agricultural products.
Are they as good as other wines? That's a subjective question. Is supermarket brand cheddar as good as bandage-wrapped cheddar from organic milk from free range cows? Many people would say either "yes," or "the difference doesn't matter to me."
I have more thoughts on this issue, which is at the heart of basically every argument about wine. You can read them here.