It's not a scam, but if you think it means you'll be able to sit where you want when you want, you are in for a (pretty bad) surprise especially on busy flights.

There are a number of things happening here:

1) A lot of seats get allocated before departure. People with status, people on full fare, and families with small children all benefit from pre-allocation. In peak summer and on some routes, the number of small families is very large, and throughout the year and on some routes, the number of status pax is so that can already be a big chunk of the cabin accounted for;

2) Theoretical seating means that if you have no status (or you would have had pre-allocation available anyway!) you only get access to a small part of the cabin. This may not include any of the preferred seats, and it may well mean, for instance, that in some cases, you won't have access to any window;

3) As you rightly found, theoretical seating also pre-allocates people when the flight goes under airport control rather than leave people who have not checked in without any seat. Most major airlines do that these days for a reason: It's best for everyone if couples or families with teenagers (or simply other groups) can sit together and on a full flight, that really is a bit of a jigsaw. Does it restrict the options of those who check in early? Yes, is it better than the alternative? Yes too.

4) If you are on a nonstop itinerary especially from London, remember that at least half of the plane will have been able to check in and in most cases choose seats well before you as their check in window will have opened 24 hours before their first segment.

So no, it's not a scam, but it's a "qualified" right, which will never mean a free bonanza, will give limited choice on most flights, and may even lead to very little or no choice at all when flights are packed, though as noted above, some seats may become available later.