Governments change often, states hardly ever. We don't want to announce recognition, which may be taken as approval of a regime we dislike. We don't want to announce non-recognition, which deprives us of functioning diplomats. We don't want to defer the question, which gives it a high profile. So we simply continue diplomatic relations with the state.
Diplomatic relations can be fine-tuned.
The range is limited only by the diplomatic imagination for nuance. By comparison, recognition and non-recognition are blunt instruments. Under the old practice of recognizing governments, we recognized Castro's government of Cuba in 1959. Then we broke diplomatic relations in 1961 without affecting the recognition. The idea of recognizing a government is now cut loose from both practical diplomacy and from the idea of recognizing a state.