More and more, now, folks with older televisions (4:3 aspect ratio) will see things cut off on the left and right, as more and more programming will be set up for display on widescreen (16:9 aspect ratio) displays, i.e., HDTVs. It is one reason, I believe, a lot of folks will break-down this year and finally buy HDTVs, despite even the bad economy, rationalizing the purchase by saying (to themselves, perhaps) that prices are going to be lower because demand is so soft due to the economy.
There are two primary ways for automated display of widescreen content on older televisions, either letter-boxed, or center-cut. Letter-boxed results in black bars above and below the screen. Many viewers despise black bars (above and below, or right and left). Also, letter-boxing results in everything displayed being presented smaller than center-cut would display those things. So in many cases, center-cut is used. This basically cuts off the left and right of the programming, assuming that most of the important stuff is in the middle.
I think letter-boxing is always better, for the reasons mentioned in the OP, but I have a 9" diagonal television (with the older, 4:3 aspect ratio). So just imagine how small everything is when a wide-screen presentation is letter-boxed. It's like a 8" diagonal or worse! It is very hard to see anything when letter-boxing is used.
There is a new technology coming down the pike called Active Format Description, which will flag certain content as preferring letter-boxing or center-cut. However, until that technology is available, widely-applied to content, correctly-applied to content, and acknowledged and used by video distributors (that's a lot of "until's"), broadcasters or video distributors must choose either one of the two and apply it to everything on the channel.
