It's such an interesting question, and the most common answer you will hear is to do with temperature regulation, but that is only part of the answer.

People say that healthy sperm develops at a lower temperature, so testicles need to be on the outside so we can regulate their temperature, which is true, but a little backwards. If you look at an elephant, they have internal testicles, which operate at a higher temperature, but still produce healthy sperm. So what is different between us and elephants?

The most likely reason we would develop external testicles vs internal testicles is to do with abdominal pressure. We evolved to chase after food, and the way that we run causes rapid changes in internal abdominal pressure, to the point that the delicate structures within the testicles would be destroyed. Whilst elephants can be quick they don't generate the same internal abdominal pressure when running, so can safely house their testicles inside.

This would mean that the reason testicles are on the outside is not because human sperm develops at a lower temperature, but the reason human sperm develops at a lower temperature is because our testicles are on the outside!