IIRC according to the Israelis they mistook it for an Egyptian ship. I think the USA officially bought that story. There are a myriad of suppositions concerning the "actual" reason. I don't know whether any other reason has been given semi-official status by anybody who knows anything.

The accounts given by the surviving sailors are pretty awful. On several USS Liberty websites you can read various accounts.

I'll bet that the Israeli pilots were so certain that the ship was Egyptian that they ignored the frantic American attempts to identify themselves as a ruse. In time of battle when mistakes happen, young men die senselessly. It isn't pretty but as we all know from recent experiences and news reports, "friendly" fire incidents happen and innocent people die.