Budo is not a thing for show. Budo is a matter of life or death. So what is there to show?
Kinjo Asoh Sensei
The martial arts are not theatre or entertainment. That is not the true Budo.
While I can see this side of the argument - that guns for instance aren't toys in the sense that you'd give them to your children, that you don't mess about applying full speed locks without any restraint and expect things to turn out just fine. Nonetheless I must say that nations show off their armed forces all the time. Even animals do it as a threat display.
The social display and management of force seems to be one of the more sensible things that people do. It discourages more serious, physical, violence because you can make a guess that you wouldn't win easily without actually fighting and risking death or serious injury. There's a trust aspect to it as well, within the community. When you show things off people get to see what sort of folks you are, they get some idea of how you relate to the rest of society. Certainly it reassures no-one in the community if martial artists are all a bunch of secretive people with steely gazes muttering about how what they do is a matter of life and death; that just makes us sound like some crazy cult. It's not a whole lot of fun either.
My take on it: Take joy in what you do and share it with people honestly. Politically, it reassures them. Spiritually, happiness and trust tend to resonate among social networks.
Is it necessary? Well, you can get by without doing it. But it does have a whole host of potential benefits.