You can recover if you lose all devices via your break-glass backup key, and you limit the blast radius of "my key got stolen" from rotating all your keys to just a single device (or maybe the more likely "I screwed up and pushed my key somewhere public")
I agree that you should use a different key per device, but when you connect to over a dozen different services/machines it quickly starts to become a serious chore to add another key. Have fun spending an hour enrolling your new device - provided you can even remember every single usage it should be enrolled with.
So basically we've been storing ssh keys directly on yubikeys the same way passkeys are stored since before passkeys were a thing.
It seemed a clearly superior option compared to letting ssh private keys roam around on random computers.
