Its teaching students to succeed, and its actually done in just about every sport. If all your instructor does is beat you, all you learn to do is tap - good for the instructor's ego and your humility, but not much of anything else.
For the most part, students know that their instructor is teaching while rolling. I doubt any of the ten year olds who take down cael Sanderson in his seminars really believe that they can take down one of the greatest wrestlers the world has ever produced.
The reason for doing it is that the instructor can guide the student very directly this way. Block every path but the one that leads to success. Your foot is wrong? You get nowhere. Your posture is wrong? You get nowhere. But if you do everything right, the instructor gives you positive feedback by allowing you to continue, and if you keep doing it right, you get the tap. Its actually a technique for re-wiring your nervous system, strengthening the correct nerve pathways - as far as I know it was the Soviets who developed it as part of their exercise science, but by now its pretty well accepted in sports physiology. If someone loses all the time, the only nerve pathways that are strengthened are the ones that lead to losing.
Or put it this way. If you're doing drills with a partner who blocks everything you do, how quickly do you think you're going to progress? Same principle.