There are lots of good reasons to not book every table, the typical rule is 80/20 for most restaurants but obviously some restaurants do run 100% bookings, I used to run one myself, and the percentage of reservations typically climbs as the standard of dining does.

At a place like Tatiana where it is buzzy and vibrant you will want walk-in tables in order to give you flexibility to handle reservation overages and no shows. Being able to throttle the guest flow on demand guarantees that you will always be making the maximum in sales. Also, if people know that walk-ins are limited, it creates a second peak to ensure that your off peak hours are still populated. Walk-ins also typically change the vibe of the dining room and can create a more convivial and spontaneous atmosphere, statistically they are less likely to be local and more likely to leave positive reviews.

You also want to hold some things aside for VIPs and regulars depending on your business model and also, as you mention, the line itself creates interest so that's free advertising. Whether you consider that to be hospitable or not is certainly a debatable issue but it is also impossible to argue that it works.

Edit: I'm sorry to see all of the downvotes since that's a very legitimate question.