If you're in the US, why don't you call Apple and ask them.
Apple have a dedicated iPhone helpline.
The number is 1-800-694-7466
Or if you find it easier to remember, it's 1-800-MY-IPHONE
EDIT It seems I'm just too funny for words, so here's a more direct and unfunny answer:
Some people may use a letter mapping of the numbers. They might do this because it's easier to remember - people of all ages and abilities use smartphones! Or they might do it because that's how they did it on a previous phone, or because they've use the same system on another device or product - Android and others also have the same number/letter mapping. They might use the same passcode/word on their TV set top box - it doesn't matter why - the option is just there.
People may like to keep things simple to use so would rather opt to use a 4 digit pin rather than a password with numbers and letters.
A proper password needs to have a keyboard entry which is significantly more fiddly than the 10 button input above. People who want the security but who have difficulty using the keyboard really don't want to have to be forced to use the keyboard every time they wake the phone or when they need to enter the passcode during other protected tasks.
Note that you can opt to use a longer passcode but have the same 10 key entry system so long as you only use numbers in the code. For longer numbers it's even more useful to have the letter mapping to make it easier to recall.
So - the options are there for different people to make choices and use the system in a way that works best for them - whatever that is, and without compromising the usability for those who just enter 4 digits without caring about the letters.
It's no good saying 'Well I don't use it' or 'That wouldn't work for me'. The point is that the design is as inclusive as possible in order to cater for everyone to use their preferred method.
Look at it another way: By removing the letters, Apple would be effectively directly targeting those people who prefer to map their simple passcode onto letters, and making their life more difficult. And what would be the point of that?