It is largely historical, applicable principally to older hardware, where limited resources (such as CPU speed and memory) meant only a relatively small number of sprites were supported.
On the other hand, it is also true that without multiplexing, the sprite circuitry would be idle much of the time, and limited resources were wasted.
Before the next frame (or next scanline) needs to be drawn, the software reprograms the hardware to display additional sprites, in other positions.
The sprite multiplexing technique relies on the program being able to identify what part of the video screen is being drawn at the moment, or being triggered by the video hardware to run a subroutine at the crucial moment.
If the video graphics hardware is not reprogrammed in time for the extra sprites to be displayed, they will not appear, or will be drawn incorrectly.