A common misconception I come across is mistaking grading for an indicator of structural integrity and/or performance in hardwood floors. While knots and mineral streaks may not be desirable in a smooth faced, unstained floor, they are generally desirable in a hand scraped and/or distressed floor. The later customer is looking for a natural, rustic character in their floor. Knots and such bring just that.
Another consideration is cost. Why pay big bucks for high end grade lumber only to a) cover it in stain, b) scrap the surface, c) hit it with a hammer, or d) all the above?