I read that the frequencies over which FM signals can be transmitted is limited between 88 MHz and 108 MHz. Why is it confined to a particular range and why specifically to this (88 MHz to 108 MHz) range?
Besides FM, other communication techniques have their own band of frequencies. What decides their band of frequencies.
The government decides the frequencies. In the United States, it's decided by the FCC in coordination with the ITU, which is the international governing body (since radio waves don't magically stop at the borders of countries).
There's nothing particular about FM that makes it more suited to those frequencies compared to others. In fact, ham radio operators and others use FM on many different frequency bands. Probably when FM broadcasting needed some spectrum, the 88 - 108 MHz was the most convenient at the time, for technological or political reasons.
In North America, 88 - 108 MHz is the FM broadcast band.
The use of frequency modulation for other purposes is not restricted to that band, however. I think, as far as physics is concerned, that FM can be used on any frequency, but for practical purposes is rarely used below 50 MHz or so, as FM normally requires a much larger channel width than AM or SSB.
FM is widely used for two-way communications between 144 and 174 MHz (Amateur, land mobile (police, taxi, and simliar service) and marine), and on higher bands.
The simple answer is the legal regulatory system; frequencies are allocated by the FCC in the US and local agencies in other countries. Usually they coordinate somewhat so the same band has the same use in different countries.
The frequency allocations are indeed determined by a regulatory agency like the FCC or the ITU.
An important factor in this process is the propagation characteristics of the band.
100 - 150 MHz are popular and used for all kinds of public services because they have a high bandwidth, but still retain the ability to 'bend' around obstacles, greatly increasing their coverage in broadcast situations with a single transmitter serving hundreds ( thousands ) of square miles.
Cellular companies were granted 800 MHz bands because they have , again , high bandwidth, but are extremely limited to line-of-site and therefore are less desirable. Cellular companies used these frequencies in a cellular pattern, with each cell covering much less ( say 25 - 50 ) square miles.
Frankly, the range is/was Arbitrary decided. There is no specific reason that FM radio is only 88 to 108 instead of 100 to 120, except that we needed a block of frequencies for purpose A, while another block for purpose B, C, D, etc.
