It was initially done as an homage to Johnny Ray, who wore a hearing aid.
One of the Smiths' "insiders" (Dave Harper) explained it this way:
"Then there was the hearing aid, of course. That was the beauty of working with Scott [Piering, Smiths temporary caretaker manager]. 'I want a hearing aid. Can you get me a hearing aid?' It's not a reasonable request particularly. I got it from a hearing aid shop in the West End somewhere; a display model. I said, 'We represent a famous pop star and he's going to be on Top Of The Pops and would like to wear a hearing aid.' And they're going, 'Well, he's not taking the piss out of the deaf, is he?' And I went into a long ramble about Johnny Ray and how it was a nod to something or other. I think we were supposed to give it back, actually."
Morrissey later (1987) explained it this way:
"I never needed a hearing aid but recently I caught a serious ear infection and literally went deaf for about four weeks. Naturally I took this as retribution for wearing a hearing aid. It was hellish - four weeks of "pardon" jokes at my expense. Someone coined it as disability chic, through which The Smiths reached out to certain parts of the public who never felt they fit the perfect mould of "pop fan". There are lots of people who want to be a member of the audience, want to get involved in the music and the lifestyle but don't feel interested in the constant chase for fashion perfection that most bands inflict on their audience. Fashion has gone through periods of being completely redundant - mainly the fault of fashion magazines illustrating the things you can buy if you're dramatically, overbearingly rich, but are of no use at all to ordinary people living in humble places. I find with, for example, Comme Des Garcons clothes, their style of being quite basic but hellishly expensive is very interesting."
Here's another interview (1986) where he discusses the hearing aid and NHS spectacles:
"I mean I was ill and I said I was ill. Nobody had ever said that they were ill before. Within this beautiful sexy syndrome I popularised NHS spectacles! I didn't popularise the hearing aid, thank God that didn't catch on, but that again was one of my statements. Not a prop because that sounds like marshmallow shoes or a polka dot suit. I mean I really maintain to this day that even the whole flowers element was remarkably creative, never whacky or stupid. We can say yes Morrissey that silly old eccentric, but I think it's nice if somebody who is eccentric can break through. Everybody follows the same rules and does exactly what they're told. All modern groups state the expected - fluently, but who cares?"