Partly right. But the fact is not the authority. We in INDIA have two completely different words for "YOU" We do not use the same "you" to address every one. We have one "you"(Tum in Hindi) to address equals are those younger than us. A different "you" (Aap) to address those elder to us or those who is not known(i men first acquaintance)
When we try to speak in English, many think that we are using these words as a result of mother tongue influence. But the fact is it is our Cultural influence. We feel awkward to call a person by his first name. Atleast, I do not feel any respect in addressing like that.
During British rule(thats when English came into India), The british rulers made us call them Sir,(No idea if they were just passionate) just make sure, they make us feel inferior (As outlined by some in a post above).
After independence, when we started to learn and speak english, our teachers did not find a word equal to "aap" (the second you used with respect) in English language and they assumed that Sir is that word as British made us use it as a symbol of respect.
This is how Sir came to be used like this. Now even if we know the actual meaning of Sir(Yup we know it is a title) we are accustomed o using it here as most of our people would not accept using first name no matter what language we use.
Dear- yes I accept it is a little absurd to use it so. But my personal feeling is that in our local languages, there is a lot of difference in the sounds and intonations when we speak caring which I dont find in English. What I mean by this is monst of our languages are like songs with rhythm(Well I mean it listen to our languages and you will notice there are different ways we drag or cut short some words according to mood of the situation). The word means same but the sounds mean different moods.
To show that I care, some noobs use dear - not knowing that we (here on the net or when we speak globally) dont care wather they show it or not.
Just the difference in culture and the way language is used to convey messages.
Never mind my Western brothers and Sisters

we will catch up :ridinghor
Sir - man in a position of authority.
you post a project so you have authority to award a project. lol thats why you get called SIR by Indian bidders.
another example is your workplace. you address your senior or boss as SIR coz they have authority to kick you out of job.
No idea for Dear. i never used it in real life or online but its a way to show that they care for you as they getting business from you.