Is this an oversight of the AV software companies? Did no one come up with this before? Could it be that if people did come up with this before that a lot of Windows computers have viruses without them knowing? Is their virus detection scheme fundamentally flawed? Should I be shocked? Shouldn't I be? I'm currently shocked but I don't know if it's justified, not an expert in the field.
The only thing that antivirus software does semi-decently is identify known software binaries. Antivirus software cannot reliably identify unknown binaries through heuristics because writing software to understand unknown software binaries is impossible in general. There are potentially an infinite number of ways of proving that, but the easiest way that occurs to me is that one of the many things necessary for understanding unknown software in general is solving the halting problem, which was proven to be impossible in general by Alan Turing.
Furthermore, the utility for a database of known malicious binaries is practically non-existent. Malicious software is always designed to exploit some vulnerability and once the vulnerability is fixed by the vendor, there is nothing for the antivirus software to do. If you could apply the definition update that the antivirus software needed to catch malicious software, you could have applied the vendor patch that fixed the vulnerability the malicious software used in the first place. That not only makes the definition update unnecessary, but handles the unknown things that the definition update would never have caught.
In the cases of a vendor being slow to patch, refusing to patch (e.g. the exploits used by the hot potato proof of concept code for all current Windows versions) or the user not applying the patch in time (e.g. lack of scheduled downtime), the inability of antivirus software to catch unknown software using those vulnerabilities provides a false sense of security. If a system is specifically targeted by a malicious hacker, the hacker would use something that antivirus software would not catch, such as a script kiddie tool against which there are no known definitions or custom code. Being unfortunate enough to be attacked by a virus, trojan, etcetera before they get definitions also means there is no protection.
Real security requires doing things like minimizing attack area and configuring things competently (e.g. not using your username as your password). That is something that you cannot get from an antivirus vendor.