Something glossed over by articles like this that discuss "Sanskrit" as a singular language is that prior to Panini, the
spoken Vedic Sanskrit language was far less codified and rules-based, and replete with swashbuckling irregular grammatical and phonetic forms that were in free variation, and often used for rhythmic or poetic effect, just as in living spoken languages today. It was a campfire language, not a scholarly one, and far
more complex and disorderly than what would follow it.
Then Panini came along and analyzed the language in a way never before done (perhaps in any language), and in doing so also forced the language into a rigid system of derivational rules from which it never emerged again. In the process, a great number of irregular forms and usages were expunged from the language, and the subjunctive and injunctive moods [1] ceased to exist entirely. Many words that once had a variety of pronunciations got standardized to "thematic" forms. Thus the language came to be known as "samskrta", which literally means "well-done" or "perfected".
He probably did this because he was trying to preserve the language of the scriptures for scholars because the common-speak that people used in their day to day lives even in 500BC was already changing rapidly enough for him to notice. By constraining the language he ended up preserving it in a way that it could be studied methodically for thousands of years, albeit in a grammatically sterilized form compared to what it was.
1. https://web.stanford.edu/~kiparsky/Papers/injunctive.article...