I actually found one of these when pulled in to help a title ship that had been put in for a previous title in the franchise and forgotten about when the lead moved on. I found it when memory profiling and after talking with a few people we figured out what it was there for and I got to be the 'hero' who found some extra memory to ship.
Perhaps the obvious question here is "hidden from who?" Blinding the entire dev team to the trick might be possible for the lead, but sounds like a pain.
But squirreling away a bit of memory that won't be announced to PMs/artists/designers/producers? I can certainly picture a couple of programmers realizing that the person calling the shots intended to push them to the absolute limits of "what will fit", and deciding to fudge those limits. Hell, hedging is common practice for programmers and freelancers today when they anticipate bad requirements, and everything I know of the game development's history says the problem used to be much worse.
At the end of production coming up to release is when there'd be a wider focus on general perf / memory usage to get everything to fit for the final release build. In my anecdote above, the reason I happened to find an example of reserved memory was just that I happened to be the first person to go looking in the right place with the right tools, not due to any particular skill or experience on my part (I was pretty junior at the time, this would probably have been around 2004 towards the end of the PS2 / Xbox console generation).
And if your performance is poor the first thing you do is add some debug code to measure what is taking too long and where the biggest gains can be made.
The whole point of these tools is to make this stuff easy to find.
I'd assume that in the era where lots of stuff was global and code was messy and convoluted to fit into a console no one would take issue with yet another global variable if it was named a clever enough name as some buffer, temporary, cache, etc. and compilers didn't yet warn about unused variables or remove them (which is an easy fix in C anyway with a single totally portable line or a special compiler specific directive).
I was under the assumption that it was more of an apocryphal story that didn't actually happen. I mean how can someone hide a static array or no op loop from a team of 20+ programmers in a game code base.
As far as I'm aware, it was never confirmed and seems a bit to far fetched to be real, but then again.... :)