>beyond suggesting that the reader (as well as the writer) is illiterate?

It's about readability and recommended copy for "digital" or "new" media. The classic forms are as valid as they have ever been. However, new media involving screens and a UX beyond handling paper in various ways has driven changes to structure that do undermine the idea of suggesting literacy problems. Not sure that implication is warranted.

A bit of a rant and example for comparison: Two sentences being a paragraph (or even one!) is similar to the single space after period mess preventing us from parsing plain text properly enough to make auto capitalization work. ie: "This vs. That." I was on board with the move, until I started seriously inputting text via mobile touch keyboard. So many things get capitalized when they shouldn't, and the single space change broke it all. Worse, when using voice dictation, there are rando capitalized words because the hinting for those gets polluted as well. This is a total mess.

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A bit of a rant and example for comparison:

Two sentences being a paragraph (or even one!) is similar to the single space after period mess preventing us from parsing plain text properly enough to make auto capitalization work. ie: "This vs. That."

I was on board with the move, until I started seriously inputting text via mobile touch keyboard. So many things get capitalized when they shouldn't, and the single space change broke it all.

Worse, when using voice dictation, there are rando capitalized words because the hinting for those gets polluted as well.

Total mess.

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I find the second example reads quicker and easier for me, and the line breaks can leave room to omit or add some words too. Having A / B tested this with various people and online for a decade or so, I am confident a significant number of people prefer more line breaks, and it's about screens and the user experience dealing with them. My own comprehension, when reading on screens of various kinds, is better too.

Tall, narrow displays strongly favor the second example, and the edit and author window provided to us here on HN is a fine example. The user may well see single lines on a wider display and or one with more resolution. The same may be true for a browser or other software full screen. But, that's not the only way things happen. Mobile often forces the tall and narrow mode, and or people running many applications on a single display may prefer to size the application display into something small freeing room for them to have more applications and the data they are displaying available to them on their primary display.

Fact is, many paragraphs do appear as that wall of text, no breaks in those scenarios. That is really the answer to your question and there is little to do with literacy in all of that.

Here's an advance on that idea, and that's line breaks in a sentence itself, sort of like code. We do see this in poetry, and stories of various kinds, but it also can be used to highlight structure, conditionals, and other complexities allowable in a single sentence out for similar readability and comprehension reasons. I first saw this kind of thing in a legal document containing a fairly large, and for legal reasons, single sentence containing a number of words normally seen in a traditional paragraph. Looks something like this:

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In this matter it is time to choose one an option to continue:

take the easy option and ignore how it is likely to impact many people in a negative way

, or

there is a harder way too, and perhaps it does make more sense in the longer term due to a far less significant, negative impact on fewer people

, and

in either case, we do require fritzles; namely, those things included in our special processing units we do not talk about with people external to our organization.

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In this matter it is time to choose one an option to continue: take the easy option and ignore how it is likely to impact many people in a negative way, or there is a harder way too, and perhaps it does make more sense in the longer term due to a far less significant, negative impact on fewer people, and in either case, we do require fritzles; namely, those things included in our special processing units we do not talk about with people external to our organization.

These two do read very differently and contain the same text.