Earlier quoted context omitted.
Once you use Encryption, it's no longer pepper, it's encryption with weak key storage (hard-coded). At that point, genuinely, why not just follow best practices and store the key securely (e.g. using an HSM)?
Because nobody knows how to do that and it is likely extremely expensive by every metric. And, no, I am not being facetious by saying nobody knows how to do that. I am being quite literal. Have you ever done that? Do you know how? Do you even know what you would google to figure out how? I'm yet to see my favorite library of course's documentation on a HSM. How do you do that in e.g. PHP with MySQL? MVC with MS SQL?…
Edit: There's even a project to literally do this directly from PHP[3]
[1] http://stackoverflow.com/questions/10796485/interfacing-with...
[2] http://en.wikipedia.org/wiki/PKCS_11
[3] http://stackoverflow.com/questions/3231293/how-to-interface-...