Now that you mention it, I guess I've only seen this in very old homes. Interesting how that hasn't caught on again with so many adults living in apartments and stuff nowadays.
In small apartments curtains are definitely a cheap way to divide space, or make a single small space more adaptable or modular. I knew plenty of young adults in tiny NYC apartments that used curtains to "wall off" a sleeping area in a studio apartment, or create a make-shift workspace. Heck, I did that during lockdowns to have a work space. Although I did discover the downside of curtains, they do little to dampen sound and (to a lesser extent) smells.