This is from an article I read a while ago (source unknown). It agrees with what I was taught as a boy, but I can claim no better authority than that.
"Nitrogen is used for a few reasons, first it is a inert gas. This means that it is a stable gas and non oxidizing. These things that are important for safety. As a non oxidizing gas, it is a fire retardant, and prevents corrizion of the rims. Second it that is has no water vapor. Water vapor can freeze at high altitudes making ice in the tire, or even worse, when landing, and the heat buildup, can cause steam which will result in a tire blow out. (Water when turned into steam, will expand over 1000x its original volume).
Third, is the ease of storage and cost. Nitrogen gas is relatively cheap compared to other inert gases, and can be stored in a metal tank for long periods of time with out any negative effects. This is the main reason N is used, even though there are many other types of inert gases.
Another reason, is that N maintains a more constant pressure 3 to 4 x longer because of the lack of oxygen and water vapor found in "shop air". ."