I know that it can be configured, but my question is why 10 pts is the default size. The reason I ask is that a professor has said it was too small to read and I'm worried a proposal could be affected by this. Perhaps knowing why 10pts is the default will assuage my worries.
The reason why the most widely used word processor sets the default size to 12pt is that it was born when affordable laser printers had a resolution of 300 dpi (dots per inch) and the fonts available at that time (the famous “35 fonts”) did not render well at the sizes that were most common in real typography, that is, 10 or 11 points.
TeX fonts (roughly, Computer Modern or other fonts based on METAFONT) could instead be produced with parameters specially tailored for a given printer and they gave much better results even at low resolution like 300 dpi. They were bitmap fonts, of course.
With the development of printing technology, home laser printers have resolutions at 1200 dpi or better, so the problem isn't a real issue any more, provided the Type1 (or OpenType or TrueType) fonts are well hinted. It was too late for changing the default size in word processors, which remained 12 points.
Why university requirements still have 12 point size? The answer is obvious. But with a good printer, 12 point is really too big; use 11 or even 10.
The 10pt come from a different time and different circumstances.
Don Knuth printed his books with professional equipment with a few thousand DPI. His equipment could easily outresolve the human eye in typical reading distance. Printed characters tended to spread a bit on paper, compared to the vector graphics they were made of. The Computer Modern compensates for that by design. That is why the Computer Modern looks like it looks, a tiny bit too thin here and there on screen and on laserprints. And good in printed books.
10pt is fine if the printing quality is very good, the paper is very good and the result has typical reading-book-size.
If somebody uses an office printer, typically fine font features cannot be reproduced at 10pt. Especially with very fine fonts and more especially if the font is made to spread a bit on paper. Typical office paper is bad for long reading too. The paper formats A4 and letter have about twice the size of the pages of reading-books where 10pt looks good. So the natural reading distance is bigger than with a book. Lines with 10pt on A4 easily become too long.
For A4 pages and office printes I prefer 11pt. With a 600dpi-1200dpi-printer with a good postscript engine and a not too fine font with good hinting, the results should be good enough. With a good office printer (like some Brother laserprinters) and good paper even 10pt or fine fonts are fine for my eyes. Typophiles might disagree but should admit, that the results are good enough to read without pain.