She's had some great photographs taken of her, but I wouldn't consider her a beautiful woman.
However, I do remember there being a lot of "Madonna is the most beautiful woman in the world" type of comments being made around in the 80s / early-90s. During that period people just used to think the biggest stars were the most "talented" or the best at what they did (i.e. "Michael Jackson is the best dancer in the world", "Slash is the best guitarist in the world"). Apparently, the biggest female pop star was also the "most beautiful" in some people's minds. Perhaps the beauty standards in the 1980s were a bit different as well - it wasn't so much about your features, but rather, what you did with them. Hell, in some cases you just had to have big hair and a lot of badly applied make up to be considered attractive.