Underline was already reducing in use away from handwritten work (I still use it on handwritten notes today, as I think do many people), before hyperlinks were a common UX element outside of academia.
It was common on typewritten works mainly because it was easy and reliable - just backspace and press the underscore key. Italics were not an option on typewriters and other daisy based printers and bold wasn't as easy (to get a good result you needed to go back multiple times), at least not without an electronic typewriter (which often automated underline and bold). With word processors and dot-matrix printers (even on some electronic typewriters) bold (sometimes multiple levels of bold) and italic became more practical, as did changing font size for titles, so we had more options and people increasingly preferred others over underlining.
It was common on typewritten works mainly because it was easy and reliable - just backspace and press the underscore key. Italics were not an option on typewriters and other daisy based printers and bold wasn't as easy (to get a good result you needed to go back multiple times), at least not without an electronic typewriter (which often automated underline and bold). With word processors and dot-matrix printers (even on some electronic typewriters) bold (sometimes multiple levels of bold) and italic became more practical, as did changing font size for titles, so we had more options and people increasingly preferred others over underlining.