Ah yes, the topic that fans still talk and agrue about to this day. It will always be known and remembered as one of the most important scenes in the Final Fantasy series. Many fans connected with her character and when she died, many felt heart broken. To this day, there are speculations and rumours regarding the choices of the producers. I would like to take a few minutes to clear everything up.
First of all, Aerith was not killed off because Square wanted to make Tifa the main heroine, or to stick her with Cloud. That was never their intention, so stop babbling about how it's the truth behind her death. Besides, it would not have been possible for them to replace Aerith with Tifa, when in the very beginning of FFVII's production, Aerith came before Tifa, and Tifa was the last character placed into the game. In fact, Cloud, Barret and Aerith were the original characters meant to be the main characters. I am not saying it makes Tifa any less important, but it is a fact that she was never in the mind's of the producers while deciding upon killing off Aerith. Here is the actual conversation between Noruma and Electronic Gaming Monthly.
EGM: We heard that the death of Aerith and the creation of Tifa both originated in a phone call between you two...
Nomura: "It's funny, some magazine ran that story, but only the beginning and ending of it. People think that I wanted to kill off Aerith and replace her with Tifa as the main character! [Laughs] The actual conversation between Mr. Kitase and myself was very, very long. Originally there were only going to be three characters in the entire game: Cloud, Barret and Aerith. Can you imagine that? And we knew even in the early concept stage that one character would have to die. But we only had three to choose from. I mean, Cloud's the main character, so you can't really kill him. And Barret... well, that's maybe too obvious. But we had to pick between Aerith and Barret. We debated this for a long time, but in the end decided to sacrifice Aerith."
EGM: Did you pick her to increase the drama?
Nomura: "In the previous FF games, it became almost a signature theme for one character to sacrifice him or herself, and often it was a similar character type from game to game, kind of a brave, last-man-standing, Barret-type character. So everyone expected that. And I think that death should be something sudden and unexpected, and Aerith's death seemed more natural and realistic. Now, when I reflect on Final Fantasy VII, the fact that fans were so offended by her sudden death probably means that we were successful with her character. If fans had simply accepted her death, that would have meant she wasn't an effective character."