In 23w41a the change was made to entities with Custom Name nbt: "The name of non-living entities will now be shown if looked at and a CustomName is set"
However, many non-living entities don't seem to act this way, including:
Armor stands
Projectiles
Area effect clouds
Items
Item frames
Fishing bobbers
Linked issues
Attachments
Comments 5
It's for usability often times. There are many situations in map and datapack making when you only want a name of an entity to be visible when looking at them. However, the CustomNameVisible tag makes the name visible from far distances and when not looking at them, similar to the text entity and can become inconvenient.
See MC-86164 for armour stands.
It would be especially convenient if this was fixed for Armor Stands. As someone who created and works with the Armor Statues datapack, it's very inconvenient that armor stands don't show their CustomName by default when looking at them. This is especially problematic and odd considering players can already name Armor Stand items in an anvil, place it and have the Armor Stand retain its item name, then break it and keep the entity name in the item.