I do know a few people who use this technique you mention. The technique ends up creating a dog that you wouldn't want out in public. The dog is not socialised properly, so you have a self-fulfilling prophecy, all you can do with the dog is train and compete, because the dog can't be trusted amongst people and other dogs. You'll see these dogs at obedience trials - they're the ones that everyone is asked not to walk past, that need a clear path to get to the ring and around the ring in case it gets loose and attacks another dog. I honestly think it's ridiculous, plenty of dogs get titled who aren't human created problems. The ideas are loosely based on dated training theories, some of which were once used in things like Schutzhund and law enforcement. To a lesser extent environments are controlled for working dogs, assistance dogs for example, but socialisation and exposure are also critical elements of that training.
Your obedience dog should be a companion, that's the true purpose of obedience in the first place. So really an obedience dog should have no problem being a normal pet, even if you don't end up competing. Are performance dogs different - sometimes but not always; and I think it applies more to the high energy sports. My female I specifically picked for being 'high drive'. She won the National flyball title and always placed against border collies in agility. The big difference between her and my other dog, well not a lot. She needs more exercise, she wants to chase things (kangaroos and bunnies), and she's created a job for herself (guarding the yard from marauding cats). But other than needing to expend more energy she is no different to any other companion dog. She snuggles on the couch, sleeps on my bed and does therapy work, cuddling mental health patients. Actually a lot of the other dogs that pass through the Delta therapy dog accreditation are obedience and flyball dogs, that's because they want dogs that are well-mannered and obedient in addition to being socialised, easy-going, and loving people.