If you scroll them they actually remove the arrows and make a lot more sense.

Before you drag: http://i.imgur.com/4MUXO.png

After you press to drag: http://i.imgur.com/BqXMY.png

To be fair, it's a huge improvement over: http://i.imgur.com/2exF7.png

As a day 1 Droid user after 10 years on Palm OS, I was stunned that the control in your third picture made it into a release, and even more stunned it persisted so long. On Palm OS you could pick a time with a maximum of three taps. There's no reason it should take more than five: one for each digit plus AM/PM.

I'm not a fan of the swiping, but you're right. It is a huge improvement.

At my job the application we're currently working on is aimed for Android 2.1 and above so we can't the new TimePickerDialog.

I actually had testers come up to me and report bugs about the Android TimePickerDialog as bugs in our application saying that it didn't work as expected and it was against the UI specifications (which of course only have pictures for the iPhone version of the application).

I had to actually replace them with two dropdown sliders and a button so that the testers would be happy.

you know you can just press the number and use the keyboard, right?

Well, after pressing backspace twice to erase the already entered numbers... It's just amazingly bad :-)