No, that doesn’t mean it shows all the latest commits. It shows all commits in the history of branches, tags and other refs, but it does not show commits that are not reachable from any ref. A typical example of a commit that is not reachable from any ref is when you’ve just run git commit --amend: the previous commit still exists locally, but it’s no longer reachable and won’t be shown in git log --all. But git reflog will confirm that it does indeed still exist.
As for why --all isn’t the default: you normally won’t want that. For instance, if you’re on branch master, and you run git log, you typically aren’t interested in the history of any feature branches, you typically want to see the history of master.
If you do normally want the --all behaviour, I recommend creating an alias.