Russia, as we know it, started as Moscow and expanded outwards. What started as the Grand Duchy of Moscow became the Russian Empire in the 16th Century under Ivan The Terrible.

In the Early 18th Century, the land which is now St Petersberg was captured from the Swedes (Who were the major northern power during the 17th Century). Tsar Peter The Great decided to build a new capital here that would be much more accessible due to its port, capitalise on the lucrative Baltic trade and bring Russia closer to Europe.

Russia was seen as a backwards, medieval, place, where peasants where still tied to the land. St Petersburg was Peter's attempt to emulate the modern European powers and in his words:

"Bring Russia kicking and screaming into the 18th century"

After the Russian Revolution, the capital was once again moved to Moscow. This was done for the opposite reason, to move away from Europe. The leaders of the young Soviet Union feared an attack from anti-communist forces, and so moved the government to somewhere a bit less accessible.

St Petersberg suffered greatly in the earlier Soviet era, and it wasn't until after the 2nd World War that a conscious effort was made to regenerate it. More about this can be read in chapter 5 of Solomon Volkov's St Petersberg: A Cultural History bear in mind though that the author is known for his anti-Soviet stance. By this time it was restored, the government was firmly established in Moscow.

EDIT: Spelling, grammar and link.

Around 30 km from the border with Finland and 100 km from border with Estonia, occupied with advancing German forces - not best place for capital. Moscow already was the capital in the past, it was more loyal to Bolsheviks, so...