I think you guys are missing some of the ways tech demos are used. Yes, they are indeed intended to be a pretty show for a product announcement or a presentation at a show, but they can be a lot more as well.
Often the tech demo is a development platform and showcase for new techniques and algorithms. Think of the skin on Ruby or the parallax mapping in the Toy Shop. These are techniques that will be shown off and dsitributed in smaller samples, but often it takes a larger demo to demonstrate how it can be properly incorporated into a scene. In a way, this all goes into showcasing the feasibility of particular techniques. There are techniques that get used that turn out to be infeasible or unpractical in a real app, but that happens when you go out to push the limit. When done well, they can be great educational tools for developers and others.
For full disclosure, I am a former tech demo contributor.
-Evan