Term was originally modelled on classic terminals like xterm
where lines get wrapped in the buffer not in the view. 
Try this: narrow an xterm to 20 columns. cat some large file, widen
it to 80 columns and scroll back in history ... you'll see a lot
of white space between columns 20 and 80.
Term is also implemented this way.
However, xterms are typically used in fixed-width windows while NB
windows get resized often as they get moved around or modes get
switched and this effect is much more noticable.

An extreme case of it was bug #86351.