As you scroll through observations in the Identify modal, they only get marked as reviewed if you do something with them – add an ID or comment, explicitly mark as reviewed, etc. When someone just scrolls past to the next observation with an arrow key, it does not get marked as reviewed. One common workflow is to scroll through each one, identify or comment on a few of them, then mark all (the remainder) as reviewed after reaching the end of the page. So I think that is one of the major use cases for the button in your screen shot.
But I do agree, it would be helpful in all contexts to be able to go both ways, and not just after everything has been marked as reviewed. It is probably a less frequent use case, though, since most people want observations out of their review stream after they have finished interacting with them.