The issue was that with an older battery, the phone would demand more power from the battery than it could provide and the phone would reset. So limiting the power was to prevent the phone from requesting too much power so it wouldn't have the issue of spontaneous reboots.

I'll agree that they should have been open about it — Apple does have a major issue with transparency. At the same time, they did admit to it relatively quickly and gave the option not to slow the phone, as well as providing cheap battery replacements (I think $25), so that you could keep running your phone at full power.