I suspect they can text without looking at their phones -- I know kids could with physical T9 keypads. Having your phone in your lap while looking forward isn't as obvious as staring at your lap is.
I think its for the cool and fun factor and to hear google text-to-speech voice talking to you. It must feel cool one way or another, its usually how kids and teenagers spread things.
I think it's also because of the teachers. This way if the teacher accuses them of texting in class, the student can deny it and there's no evidence of the message.