If we go into splitting hairs, it doesn't really throw the graphics away, it simply lacks the "filter" to display them but they are there still, as in it recognizes the graphics object correctly and lays out it on the page. Based on the error message, hypothetically I suppose you could even make a custom filter to handle the object.

But this really goes more into the facet of Office files that allowed embedding pretty much anything into them, and relying on this "filter" system (I guess OLE) to handle embedded objects. So while the DOC file itself is getting parsed and rendered pretty much perfectly, the embedded objects are another story.

In the same sense I'd say browser might open some HTML page "fine" even if it doesn't know how to handle some image format that is used on the page; it'd still handles the HTML correctly.

No, you're not wrong, another commenter points out that latest Word opens the document but doesn't display the graphics.