Daylight Saving Time is NOT observed in Hawaii, American Samoa, Guam, Puerto Rico, the Virgin Islands, the Commonwealth of Northern Mariana Islands, and Arizona.
Why 2:00 a.m? It was originally chosen as the changeover time because it was practical and minimized disruption. Most people were at home and this was the time when the fewest trains were running. It is late enough to minimally affect bars and restaurants, and it prevents the day from switching to yesterday, which would be confusing. It is early enough that the entire continental U.S. switches by daybreak, and the changeover occurs before most early shift workers and early churchgoers are affected.