Earlier quoted context omitted.
It's been the default since Windows 95, and I suspect it's because it was just noise to the average and upcoming computer user (ignoring the fact that coolsong.mp3.exe would soon become a problem, since that probably hadn't happened yet). MacOS functionally did the same, so MS probably wanted to seem equally 'sleek'. The fact that it continued to be the default past Windows 98/ME/2000, when problems caused by it were…
Huh, I could swear the Windows XP we had when I was a kid showed file extensions by default.
It was still a default on some Windows 10 installations I've made, so it's still around (can't confirm 11, since I haven't installed that for myself).