Don't get me wrong, it is a useful feature. It can be really annoying to write out a new file name only to have it wiped for forgetting the file extension, for which you have to restore the original file name to discover.
The really frustrating thing however is that Windows simply refuses to let you discover what that file extension is without making you go through the tedious task of turning them all on. How hard could it be to list it in the properties window for that file? Or perhaps be wildly radical and actually even let you change the file extension there! In fact, if it unequivocally told the average user what the real file extension on a maliciously named .exe actually was, it may just be helpful to some of them. Instead, they just tell you which program has been associated with that extension. I honestly can't believe no one at Microsoft has ever even considered this. It's one of my most common grievances.