The idea is that the diesel engine powering the generator doesn't do well under low-load conditions. Downtime for repairs means no fish in the hold and no money in the bank, so as a precaution, many/most fishboats run their lights all the time, even in the daytime, to keep the diesel loaded.
I'm with you on the safety issue. In confined waters, encountering one of those guys can ruin your night vision in a hurry. However, when I crewed on offshore races, I always felt uneasy sailing with just the nav lights on. Even on a moonlit night you can't see squat. There are lots of things out there that go bump in the night. Kelp rafts, unlit buoys, drift nets, logs, deadheads, timbers discarded from cargo ships, even partially submerged shipping containers. Running into the wrong one can be fatal.
Quinn