No, it has never been explained but if Indy IV is eventually made,
I'm hoping this would become part of the story. Here's my take:
You can see in George Hall's makeup that there is a 6" vertical gash
down the right side of his face. To me, it looks like a large cut from
a knife or perhaps even a sabre wound. I figure this would have
probably happened around the late 1950's.
In my personal Indy world, losing the eye would make him retire from
the "adventure business" and eventually turn him into the indignant,
rambling, tall-tale-telling, old man from the series (like it or not).
Great question - Welcome to The Raven, Hawkangel!