I doubt it's something that originated in China as a pre-determined curriculum. It sounds like Mac-Dojo or in this case Mac-Kwoon syndrome to me. Forms are just the library of techniques and a way to condition the body to develop muscle memory. I don't see how one could gain combat skill without learning the applications in a realistic way under pressure. Applications should be taught slowly at first and then pressure tested as the student progresses. This and sparring are key to developing a fighters combat skill. All of the forms that I have been taught have tons of variations or hidden applications within but you really need a good sifu to help you discover them.