The reason is quite simple: more often than not the actual error is way before what users think the errors is. eg. video playback may crash if some setup at the very beginning (audio devices, video driver setup etc) went wrong. If users then just post the snipped where eg video playback crashed it's completely useless as it doesn't contain the important information for developers - the context.
Don't worry too much about "private" stuff, passwords etc are usually automatically redacted in kodi logs so no one will know about them. And knowing that your NAS is at 192.168.1.123 won't give anyone access to it either.
If you are worried that your log shows "playing XXX_hardcore_porn_from_torrent_site.mkv" then, well, rename that file to something harmless before.
Anyways, if in doubt do a clean installation (which doesn't contain any possible private info), play files from local harddrives with harmless names, and don't install tons of addons. Then you have nothing to worry about and both you and devs know that it's not one of the odd addons or config settings that's causing your problems.
TL;DR Most important thing to know is that cut down or redacted logs will be simply ignored by devs - so if you want support post full logs. Cutting down or redacting logs is wasted time, no one will look at them.
so long,
Hias