The imperial title in the last decades of the Vth century lost quite a lot of its luster in the western Empire : there was a succession of emperors whom legitimacy was at best controversial and barely acknowledged by Constantinople, as for Majorian, and more generally only really acknowledged in Italy (and immediate regions), the rest of the provinces being let to warlordism either Barbarian (especially Wisigoths) or Roman (Marcellinus, Aetius, Vincentius, etc.) whom acknowledgement of the emperor was essentially superficial.
Not that the emperors had much power in Italy itself, and while not entirely deprived of authority and prestige, Roman and/or Barbarian generals held a lot of power there : it was nothing new, as Barbarian or semi-Barbarian strong men exerted an important political and institutional role since the late IVth century such as Frankish generals Merobaud, Richomer and Bauto; Andragathius, probably a Goth; and of course Stilicho.

The difference there is that with the collapse of the Valentinian dynasty (and after a period of anti-Barbarian dominance in the highest levels of Roman military and civil administration), and the rupture of an institutional continuity, these strong men gained much more power and had a legitimacy of their own, best exemplified by the long rule of Ricimer as patrician, meaning de facto dictator of what remained of the western Roman Empire in Italy making and removing emperors, with the at least partial consent and support of senatorial elites on a strategy of sanctuarisation of Italy rather than attempting to preserve to recover imperial authority in provinces at all costs (not that there was not a provincial policy in Ravenna, but more tied up to alliance with local warlords)

There's a certain moment of hesitation after Ricimer's death, only briefly suceeded by his nephew Gundobad who rather elected to rule as Barbarian king and Roman general in southern-eastern Gaul; allowing Julius Nepos (the successor of Marcellinus, the general ruling over Dalmatia), with support from Constantinople, to take the purple without real challenger, and apparently following the general policy of his predecessors which might have been a reason why he had to remove Eccidius, the general in charge of Gaul for the Empire, from the region and call him to Italy, sending Orestes in his place.

We don't know much of Orestes, safe that he was an important civil servant in Attilla's court (and there's room to propose that this Orestes was a different person). Regardless, we'd be looking at an important civil and military servant in the late Empire and later authors depict him as an able man, possibly having tied new peace and alliance negotiations with Barbarians, including Vandals; possibly supported by Italian elites refusing dominance from Constantinople via proxy and Barbarian regency.
However, would it be only by force of habit due to decades of feeble imperial authority and without clear connection to senatorial families (all emperors from Italy were issued from important Roman families), proclaiming himself as emperor might have been risky and not that politically relevant : taking the place of who were the real strong men in Roman Italy since the Vth century was possibly tying him much more efficiently to an institutional legitimacy and prestige, more efficiently and more political leeway.

Why, however, choose his son as emperor rather than choosing an Italian emperor or figurehead? There's no clear answer, unfortunately. We can, at best, speculate that Orestes didn't want the emperor to be too powerful and too rooted down in Italo-Roman politics and able to challenge him (as late emperors still attempted from time to time against Italian patricians).

- Late Roman Warlords; Penny McGeorge; 2003