The human psyche has developed to want consonance and feels very uncomfortable with dissonance. As such, the brain is motivated to reduce the feeling of dissonance similar to the way it is motivated to reduce hunger. When our view of ourselves or our view of the world contrasts with something we encounter in reality we feel dissonant, and we seek to stop feeling that way, usually by the path of least resistance. In many cases the easiest thing to do is lie to ourselves in some way, or engage in self justification.
So if I have been flirting with a girl and I am convinced she's flirting back, it may feel very bad to find out from a friend that she doesn't like me because I'm an asshole. I may then reduce that feeling in one of two ways. I can work to change myself into less of an asshole, or I can tell myself that she's just a stupid bitch and I don't want her anyway. You can see which is easiest, and which many people would choose.
Likewise, if I have a female friend whom I do not see as attractive in any way and whom I believe doesn't see me as attractive, I may feel very uncomfortable if I find out from a friend that she likes me. I may then tell myself that if she knew the real me she would change her mind, I might even treat her a little more rudely.
In both cases the new information screwed with my view of myself and how I saw the world, and I rationalized to reduce the feeling. This is known as cognitive dissonance reduction.
This doesn't effect all of our views. When we understand something is subjective, like ice cream flavors, we tend not to care if other people disagree. But the more the conflict involves beliefs and concepts about our identity or our narrative, the more it causes dissonance, and the more irrational we tend to be when trying to reduce the feeling.
Your brain avoids dissonance on many levels. For example, it will change the details of memories to be more consistent with how you think and feel now, than how you actually felt at the time. It will also assume, when imagining the future, that you will think and feel exactly as you do now, rather than how you might be feeling then. This is known as consistency bias.
So anyway, my theory is that because we spend almost all of our waking moments not looking at ourselves or hearing our real voice, this allows us to indulge in little distortions of our identity. We can imagine ourselves not quite as fat, or as scrawny, or as bald. We can imagine ourselves to be a little more suave, or masculine, or attractive. We usually don't exaggerate too far because our higher intellect kicks in, but we go farther than we realize. Upon seeing and hearing ourselves, those illusions are confronted on a very basic level. We don't intuitively know exactly what the conflict is, but we feel the dissonance, and there is no path to reduction. Though some will say things like "the camera adds ten pounds," for most of us there is no easy lie or justification that will take it all away, and so we are left with a strong aversion. Since we cannot remedy the situation, we are motivated to avoid it.
Of course, the more we do see and hear ourselves, the more our inner view adjusts and so those confrontations produce less and less dissonance.
I wouldn't label any of this as dysmorphia because that implies some sort of pathology. For some people these feelings could manifest into something extreme, like obsessive fitness training, dieting, or extensive plastic surgery, but to simply feel uncomfortable with and avoid seeing ourselves is the sign of a normal functioning brain.
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