it's also, high-key, a tremendous security risk.
every single report of an executable virus i've ever heard of, including the yes-it-exists-but-not-as-broadly-as-emails-claim "jpeg viruses", depends on the OS being defaulted to hide file extensions. what better way to dupe even a relatively savvy computer user into double-clicking on virus.exe when it actually appears as cutekitten.jpg? when, of course, the actual filename is cutekitten.jpg.exe and windows is "helpfully" hiding the .exe part of the name because its icon is somehow enough of an indicator that it runs - except that embedding icons in .exe files is almost trivial, so of course budding virusmakers would embed the default .jpg icon.
one would think that enough occurrences of this around the world, on the OS with the largest desktop user share in the world by a huge margin, would be enough for microsoft to decide "maybe we should walk this option back a bit" at some point between 1996 and today. but then they'll do basically everything but that - UAC prompts (that users grow accustomed to, stop reading, and accept regardless of content), Windows SmartScreen prompts (that users grow accustomed to, stop reading, and bypass regardless of content)... it's almost like the appearance of user-friendliness is more important than actually allowing the user to become friendly with the system (as opposed to fostering open hostility between the system and user).