Was it necessary for a game developer (in Android, game consoles,
online, or in desktop) to display the loading screen to cover
unfinished rendered game environment and to prevent from other users
thinking that this game is either lagging or freeze.
Yes, loading screens are used to hide resource loading and it's somehow a more entertaining way to tell the player to wait. Otherwise the player will have terrible impression on the game, if I showed him an unfinished scene. I can recall that many reviews always mention when levels aren't completely loaded; be it textures or 3D objects, not only it will have bad impact on the gamers impression it will usually affect the critic reviews (which may or may not be important).
I'm thinking if the game runs smoothly, then, I don't need necessarily to add the loading screen since it appears to be too showy or took long for making animated presentations before the game.
If you let the player continue traversing the game while the level is not really loaded then I don't really call this is a game "that runs smoothly".
On the technical side, introducing a seamless world isn't always technically possible (and even if possible isn't particularity easy to do) due to the size of the current gen game worlds and somehow limited memory (at least on PS3 and XBOX360, also on mobile devices). This often requires building an asynchronous loading mechanism, and do alot of swapping between the hard disk and the memory, this is particularly tricky to manage without affecting the game performance.
Even if you have a huge memory it's not always practical to load the whole level into memory. This has a lot to do with caching and computer architecture, being in memory doesn't mean it won't affect performance, if your game has a lot of chache misses then it won't particularity perform well. That's is why games are moving towards cache friendly architecture (component driven design).
I can recall Borderlands, Mass Effect and Skyrim, even though they almost managed to get seamless open world right, I usually noticed a lot of pop-ups and unfinished objects (PS3 version). Uncharted 2 on the other hand was an almost seamless experience but keep in mind that the game was linear and is not as the same scale as the others I mentioned.
At last a lot of games innovated in that area. Skyrims shows nice 3D Models, Heavy Rain and Beyond Two souls show some characters detailed faces.
Some games like Beyond Two Souls innovate in their loading screens, so loading screens might add artistic value to the game and might even let you connect with the characters . Others give you tips and tricks.
And my favorite Fallout 3 loading screens, gives you more info about the world and the environment in usually a funny way and lets you connect with it.
To be honest I don't see them going anytime soon, I always see loading screens more than a polite way to tell the player to wait, sometimes it adds to the artistic value of the game, but I am sure things will get better and you will see less of them, especially if SSD dominated the market.