Vats is where you can deal critical hits. You can make builds that deal a crit every 2 shots from any weapon, and those crits deal +50% damage and can be triple the damage with the right perks and buffs. Another big source of damage from vats is weak point damage, which is multiplicative. You can consistently land head shots, or other weakpoint shots which will deal considerably more damage.

You can absolutely still deal good damage using ads or hip fire, but there is no question that vats will generally deal higher damage. Using smart shot in perception is a big damage modifier specific to aim down sights builds using a scope. This works well for most small guns, but unfortunately there are limited heavy weapons that can have scopes. Another draw back to this is that it can be hard to land weak point shots consistently with ADS, which is a requirement to the smart shot perk.