They recently added the high quality upload option, I'm guessing most people just want the faster upload and use the compressed versions.
Edit: I can see it in desktop upload - I must not have used that for a while. I uploaded a big image as 'high resolution' (actually, you can't select high resolution because the photo is already being uploaded by the time this radio button becomes available for clicking) and facebook shrunk it down to a paltry 720x480. The UI blows it up to larger than this, so it looks more blurry.
The basic uploader has no 'high resolution' option, but didnt shrink the uploaded photo down as much.
I checked a 640x434 photo that I'd uploaded via API. As you said, they did recompress it, with a noticeable difference in quality. I had already set a reasonable web compression level. Their recompression reduced it only from 88KB to 84KB.