Why is cyclopropane planar?
This is like asking why $\ce{HCl}$ is linear–just as two points define a line, three points define a plane. There isn't any way to orient the three methylene groups in space that they aren't coplanar.
$\hspace{8cm}$
Torsional strain in cyclopropane is also significant for this reason (the molecule has a $\mathrm{C_3}$ axis through the center of the ring, meaning every hydrogen is overlapping). Any reduction in torsional strain, however, decreases the already weak carbon-carbon $\ce{sp^3}$ orbital overlap. Though the $\ce{C-C-C}$ bond angles are $60º$, the orbitals are still oriented roughly $109.5º$ from one another, resulting in very weak and highly strained banana bonds.
$\hspace{8cm}$
Why is cyclobutane nonplanar?
Cyclobutane has one additional methylene, and can reduce its torsional strain by orienting one methylene out of the plane of the other three.
$\hspace{7.3cm}$
This is in part possible due to the much greater carbon-carbon $\ce{sp^3}$ orbital overlap.