Because on the client side you may not do any conversion, you may just do playback, which is far cheaper and usually done by dedicated hardware. Not converting is better for quality and saves a lot of processing resources on the server (ie. you may get away with a really low power server if all files can be served that way, while conversion requires quite some beefy system). And Bandwidth is usually not a concern on a local network.
Yeah this was my reasoning. In my envisaged use of an Android client, I definitely want to do simple playback with no conversion. Both my Android TV boxes and my Google Pixel phone are capable of playing all the video files in my library as-is, with no transcoding, and this would be the default use-case for me.
And as Hendrik mentions, I also want to save processing resources on the server. Right now my MC server runs in a VirtualBox VM, on my home server/NAS. I put it in there so it would be guaranteed to be available at all times that my media was online, and so that I could do library management without affecting anyone currently watching media on the HTPC.
The first (and only) time I tried Panel on one of my Android boxes, I saw that the CPU on that MC Server VM went immediately to 100% as the MC server was transcoding everything before sending it to the Android client. I knew from experience that my Android box has the necessary codecs and capabilities to play every video in my library directly - ie if I simply opened that file directly in Kodi, loaded from the SMB share, it would display fine. So this forced transcoding seemed like a big waste of resources, and quite likely unsubstainable: if I had two such clients playing files simultaneously, I doubt the MC server could have kept up with both at once, given that just one took it to 100% CPU.
Jim asked "why transfer a big file and convert it to something smaller". I guess this is because Jim is primarily thinking of the Android client as being used on handheld phones, accessing the library remotely, where bandwidth is an issue? And yes, in that use case I would want to choose to transcode down to 720p or whatever, with a low bitrate, so as not to blow my monthly data allowance on one video.
But I envisage the vast majority of my Android usage occurring locally, over Ethernet (for the Android TV boxes) or WiFi (phone/tablet). Bandwidth here is no issue, so it's much more important to avoid the CPU cycles on the server and potential quality losses of transcoding than it is to minimise the bitrate. The only conversion I'm likely to want is DSP stuff, like converting 5.1 soundtracks down to 2.0. But again I'd like to be able to do that on the client, just like I do today in MC.
In summary, I can see there are use cases where transcoding will be valuable, but equally I believe an option of "no change" is also vital.