Why is osteoarthritis painful?
This is not known with certainty. The key point to recall is that for a given objective presentation, the subjective presentation can be quite variable.
In osteoarthritis, the cartilage may wear away in some areas, greatly decreasing its ability to act as a shock absorber. As the cartilage deteriorates, the joint tips (collapses where cartilage is lost) and soft tissue may stretch (on the tensile side), perhaps causing pain.
Fluid in the knee could be under pressure and also painful by simple distension.
Also, bone edema (seen frequently in DJD) can cause pain, as we know in the cases of "kissing contusions".
The short answer is: we are not sure. Cartilage does not have the receptors to feel pain. Hence, it must be the bone or the synovium that transmits the pain---but not all “ugly” joints hurt. You cannot look at an xray and predict necessarily if somebody has pain; more to the point, you cannot look at an xray showing DJD and predict necessarily if the pain is necessarily caused by the DJD (and not, say, bursitis, radiculopathy or vascular disease).
Recall: a dog can have lice and fleas. In the case of arthritis, you can certainly have a second disease present concurrently (after all, it is typically a condition of aging, so other systems may be winding down too!) and you cannot even be sure that the arthritis you see literally in black and white is symptomatic.
(Note: there is certainly a relationship between objective presentation and subjective presentation. It's just not perfectly correlated. Just as hoof beats suggest horses, not zebras, pain right where there is joint space narrowing with osteophytes suggests that DJD is the cause.)