Why is the Protestant Reformation so important to the history of Western Civilization?

Music historian here. I would start by saying that one could argue that the Reformation was inevitable; if Luther didn't post his 95 theses, someone else would have come along and done something similar. There were already Reformation-esque movements cropping up all over Europe and had been for some time (the Waldensians, Savonarola in Florence, John Wycliffe). Others can more accurately comment on the effects of the Reformation on the Christian faith globally. I'll just add that some argue that Protestant thought about the individual, work ethic, etc. laid the foundation for capitalism and the individual-oriented philosophical thought of the 18th century.

Back to music, though. One of the most interesting contributions of Luther's Reformation to the development of Western music was his emphasis on congregational participation. The Catholic church had gorgeous, polyphonic mass settings that were largely "consumed" or simply listened to. Luther was big on participation. This led to congregational music being simplified. Chorales became more common (usually homophonic, in the vernacular language). The use of the vernacular was particularly important.

Calvin, of course, took this much further and did away with instruments altogether. He was also in favor of only singing scripture- hence the Calvinist tradition of psalm-singing.

The changes instituted by the Reformers arguably spurred change in the Catholic church (the Counter-Reformation), and from this movement we get reform in music as well. Palestrina, probably the most influential composer of his time, adopted a style of composition that we have come to call "Palestrina counterpoint," that composers in the Western tradition still study today. His Pope Marcellus Mass is taught was the representative example of Counter Reformation music- transparent enough that the words could be understood by the congregation, but still grand enough to fit the cathedrals and sumptuous vestments of the church. I cannot overstate the importance of Palestrina counterpoint. Bach, Mozart, Beethoven, all the "greats" of the 17th-19th century studied it.

These musical changes may seem insignificant in the scope of the history of Western Civilization, but they show how the Reformation deeply influenced this very important aspect of human culture. Many of the changes I briefly outlined above can be observed in visual art.

Again, this is just my take as a music historian. I will leave the broader historical and philosophical comments to those more qualified than myself.