I can see how it can modify GPU driver behavior, but I cannot see how it would get you better performance with everything else the same?

What it should do is ensure some things not relevant to Half-Life 2 were not done, thus getting better performance for this game in particular, but there is no guarantee that same optimizations work for other applications or games, so one should not expect an overall improvement.

Unless they are doing some silly things like dropping quality, but that's the "everything else the same" point.

If not, why not have this enabled as default behavior instead?

I wouldn't be surprised if it made other games on the Source engine faster, but everything else slower.