I think in this and many other industries, people that are otherwise talented and intelligent individuals write these types of "trumped up" resumes only because they know that everyone else is doing it. If they don't also exaggerate the truth and try to talk up their strengths, then they fear being overlooked. It's not necessarily that anyone is being "fooled" by the exaggerated resumes, it just means that everyone sounds the same and it's just a game that both parties are forced to play. It's hard to distinguish on a cover letter whether "led a team of..." means one other person or twenty other people, for instance.