Why can you only have 100 Friends?

Why do people have close to 100 friend's on PSN & Xbox Live for??

Do you really play 100 of your friends

Its not really that they play with all 100, of them all of the time. Its mostly new people you meet when you dive into a new game. If you don't already have a standard group you roll out with, then these new players, "friends" you acquire come in handy for jumping into games so you either:

A: Have people to play the game with when the main group you play with isn't online to play it.
B: Start building up to having a group to play with.

For the most part, you add people cause they're good at the game, they're trying to learn a game by playing you, or sometimes the games you played was fun and you want them for rematch or to be on your team again down the road. The reason people end up hitting the cap is usually cause they play more and more games online and get more friends for different games. Deleting them can sometimes be difficult if the game you added them for is still played between you, you enjoy the person's company or skill when they join your games, or you may have actual common interests.

Typically, people have their groups and communities they play with. But also you might have local friends and what not. Usually, those are the people you don't delete.
 
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