Naruto Shippuuden Episode 40-41

[KrayZ33]

but if the Hokage was chosen based on just strength of combat prowess you could end up with a psycho Hokage who would be horrible as a leader but could kill anyone who disagreed with him.

which is exactly why Oro didn't become the title Hokage and left the village.
The Hokage is the most powerfull AND for their ideals, the most usefull, ninja in the village.

this is why tsnuade did become the 5th...

she is a Sanin (S-class i believe?) and has "legendary status" and is also trained in healing etc. so she can take care of her people and protect them.

ah and the title is usally given from the former Hokage.
so the first and second (i m pretty sure they were hokage at the same time even though only one was active) gave the title to the third, the third to the fourth -> fourth died so the third came again -> third died -> high ranked inhabitants and people of konoha have choosen tsunade

that sums it up i think