Schrodinger simply is saying that currently, the way we see physics, we think that things are genuinely undetermined until the act of observation.

It's that simple. It doesn't attempt to substantiate anything. It doesn't advance any theories. It's not a real experiment. It's just saying something in an extreme yet obvious way; in this case that we consider everything in the quantum world to be in an entangled state until the act of observation.

And the reason it was made is to just show how crazy entanglement theories sound.