[tomn]

You're right -- look at any LED datasheet and you'll see the efficiency get lower at higher currents.

The real reason for PWM dimming is simplicity, expanse and size.

Turning an LED on and off is a lot simpler than a real constant-current LED driver: indicator LEDs can be driven directly from a digital output on a microcontroller, or switched with just a mosfet. Constant current is always going to be more components.

In AC-powered applications, making an LED not flicker at 100/120Hz requires capacitance for energy storage, which are bulky and unreliable.

[kevin_thibedeau]

Constant current LED drivers usually use PWM for brightness control. They still have a low value shunt resistor to set the fixed current limit. Making a system with variable current adds much more complexity.

[tomn]

True, some do, though some don't (and some have both). Even dedicated LED drivers using PWM can be better than simple PWM by using smarter modulation to get high resolution without reducing the frequency to something noticeable.