There were several reasons for doing it.
18 in tires back then (at one point)were 4.25 wide at the widest.
So a 16 could get you more rubber on the road + more traction for dragracing.
A 16, not fully inflated on a rigid has a better ride than an 18 in.
16s tended to last longer, cheaper per mile if you rode a lot.
They dont lower the bike much, maybe 1/4 or 3/8 inch using the profiles they had then. They make a bigger optical difference, back then big meats on cars was what everyone did..
So some folks that were not into choppers did that mod.
Remember back in the day there were many Hondas with 8 or 10 over forks, they resembled a dog trying to have relations with your leg, now some of them bikes have had the "chopper" taken out of them. They actually would say I got 8 inches if chopper on my bike..