Back then MySQL used the memory engine for implicit temporary tables, and memory engine has no variable width data types. So a "varchar" becomes a "char", and a "varchar(255) charset utf8" becomes an allocation of six times 255 = 1530 bytes (filled with a lot of padding).

Reducing this to 3 bytes is still bad, but only half as bad as before.

Only MySQL 8 introduced innodb typed temporary tables (unlogged, even), so with MySQL 8 this is no longer a problem.