By hiding file extensions by default, Windows 7 does make things a bit easier for the average PC user. In previous versions of Windows, changing the name of a file meant that you had to work around the file extensions. Since changing the file extensions was a rare task, it makes sense to hide it unless you really need it.
Some advanced users of Windows occasionally need to change the file extension. For example, Windows memory dump files by default have a *.dmp file extension. However, there is no program in Windows 7 that uses that file designation; it is there only to alert the user of the file’s contents.
By changing the file extension to *.txt or something else, you can avoid the error window that appears when you click on the memory dump file and also avoid temporarily associating the extension with notepad or some other program.
Another reason for showing hidden file extensions has to do with program compatibility. Programs that are backward compatible can open files made in a previous version of the software. However, this doesn’t mean that older file extensions are automatically associated with the newer version. By manually changing the file extension, you can again avoid the Windows 7 error message that no program is set to open with that particular file.
Whatever you reasons, showing hidden file extensions is simply a matter of editing one option in the Folder Options window. Of course, you can choose to hide them again by re-checking the option.