In earlier times, measuring equipment wasn't accurate enough, so races had to be done in parallel with people starting at the same time. Today, that's no longer necessary. In fact, people racing one after another is exactly how we hand out world records.
Of course, the Olympics and other events like them aren't there to find the best athletes in some absolute sense; these events are there to entertain spectators. Otherwise, swimmers could just do time trials at home and mail in times.
And spectators like people racing each other at the same time.
Additionally, it would make races take 8x to 10x amount of time.
While that's technically true, the drafting effect actually means that being a bit more than a body length behind the swimmer next to you is beneficial to you. That's another part of the philosophy why the fastest swimmers are assigned the center lanes, and the slowest the outermost lanes, to balance out the choppiness of being by the sides with creating a potential for drafting. Of course intentionally drafting is not a strategy that will win you the race, especially in short events, but in longer events it can be important to keep pace with the swimmer next to you while they need to expend more energy and you draft off of them either with the intention to eventually pass them or to stay ahead of the swimmers on your outside.
In cases where there are less swimmers than lanes, they leave the edge lanes empty.
