They are removed soon after birth while they are still cartilaginous (not developed bone). I won't lie to you - it CLEARLY causes them a lot of pain - but they get over it quickly. I don't know what is involved with getting them removed later in life, but I imagine that it is much more difficult and expensive.
Why? - I don't know about looks - but they certainly do get caught on things in gun dogs. In Canada (and anywhere else with open season during snowy winters) they FREQUENTLY get injured when the snow is crusty but not enough to hold the dog's weight. My buddies with dogs who still have dew claws have to tape them down with hockey tape or they get all cut up. Other than that, I have only ever witnessed, with my own eyes, one serious dew claw injury, in a retriever who ripped it on a water retrieve. It was cost the hunting trip, a lot of pain and over 500$ by the time the dust settled to resolve it. Personally, I am a fan of early dew claw removal for gun dogs, and would ask any breeder who I was considering getting a pup from to have it done early on.
-Croc