Looting as many uses, on the most basic level it's a form of gambling, you never know when you're going to get something good. It also offer a nice progression that's (ideally) visually represented on your character. It also offer a natural way to give reward to the player for every combat encounter, even if they're part of any mission and it also means that mission which have useless reward for the player (say it gives a sniper but the player is focused on shotgun) still have the possibility of useful reward. It also gives a reason for the player to look at the environment and notice the small details.
That being said, it's often done poorly, shoving way too much crap at the player which will never be useful, usually color coded so that the player doesn't even look at 90% of it. I think a good comparison is soulsborn and Nioh. Soulsborn have very few weapon and armor (compare to Nioh), but each is somewhat unique in gameplay terms (speed/reach/moveset), it means every drop is worth at least looking at and maybe even try for a little bit of time, this means there's less stuff to loot from enemy/environment but they use the upgrade/crafting system to fill that gap. Nioh biggest difference from soulborn is the diablo esque loot, and I think it's the game biggest failing, it throws five bajillions weapon at the player, but it's almost all crap with no real gameplay difference. As a results I'm way less excited when I loot something in Nioh than a soulborn.
Anyway the video seems to go along with my view that CP is just straight up better than witcher 3, but witcher 3 hype was built by people who either didn't play it or drop early and are just going from they heard from other player.