Here is the deal:

The machine readable format has been around for at least ten years. It was standardized and agreed to by most countries that "count". The point of them is simple... Once "everyone" has them, every airport will then hopefully have scanners (not just in the US, after slowly proliferating for years, I see them more and more since 9/11). Not only does this speed things up, but it also cuts down on fake passports, passport numbers, misprints, mistakes, etc.

Many countries have been using different database systems for tracking o/d's. Not only have they not necessarily been compatible, but human error has played a big part (customs agents who are too lazy to punch in every passport, or who enter mistaken information). A quick scan, gets rid of most of these problems, and the automation that comes with it eliminates many fake passports from the system.

In recent times, a stolen US passport could be picked apart and "washed" within two hours. Even if it were immediately reported stolen, it could take as long as 6-8 weeks for the number to "show up" on screens even in many "modern" countries (Until two years ago at LHR for example if you looked inward at the Immigation officers desks, they would keep manually lists of "stolen" passports and numbers. This gave ample opportunity for someone to travel about. Once everything is online the window for these activities is zseverely curtailed.