It appears that they put an actual file system in front of S3 (AWS EFS basically) and then perform transparent syncing. The blog post discusses a lot of caveats (consistency, for example) or object namings (incosistencies are emitted as events to customers).

Having been a fan of S3 for such a long time, I'm really a fan of the design. It's a good compromise and kudos to whoever managed to push through the design.

Because people will use it as filesystem regardless of the original intent because it is very convenient abstraction. So might as well do it in optimal and supported way I guess ?

Because without significant engineering effort (see the blog post), the mismatch between object store semantics and file semantics mean you will probably Have A Bad Time. In much earlier eras of S3, there were also some implementation specifics like throughput limits based on key prefixes (that one vanished circa 2016) that made it even worse to use for hierarchical directory shapes.

They found a way to make money on it by putting a cache in front of it. Less load for them, better performance for you. Maybe you save money, maybe you dont.