It's the built-in plot.
If the world is secret, you can introduce your character to it, and have yourself an inherent plot. With plentiful opportunities for info-dumping about what the secret world is.
Mind you, you could have a lot of that if it's just unknown, like the culture that raids recycling bins for bottles, but it's easier if it's utterly unknown.
You note this is an out of universe explanation. It still doesn't justify why they are hiding. Besides the one L. Jagi Lamplighter used in the Prospero's Daughter trilogy, i can only think, really, of two:
- they're too dangerous and we really would exterminate them -- which requires as a corollary, that they are a manifest danger to human life.
- once upon a time, some of them decides it was too dangerous or something, and magically compelled them all to hide. Really powerful magic needed there. But then, I think you could work something out if you had a really powerful being that was sulking. Perhaps some beings that had been worshiped decided that when the worship stopped, the world was too dangerous, so there.
It's something that writers could stand to work out in more detail.
