I was always taught it gave insight to the prospective employer on how you'd fit in culturally and also whether you were more of a loner or team worker.
As such I was always advised to include ones which showed I could work/completely a task happily independently AND ones which showed I was capable of social interaction and working within a team.
I'm actually not great at team activities or sports but certain hobbies gave the impression I was/could be.
yes to being specific/ including detail too, eg favourite authors and genres
Mine usually included:
Reading, theatre, cinema, swimming, badminton (doubles), guiding/scouting.
As an interviewer I agree it gives an opportunity for a "soft" opening to relax everyone (yes interviewers get nervous too especially if they're new to it), it also gives a general idea what a person is like which can help with whether they'll fit the role/organisation.
Some roles I was recruiting for also required a level of fitness and stamina so quite honesty seeing some kind of physical activity was good too.
Also gives insight into whether that person has a good attention span, attention to detail etc
I was once asked in an interview to briefly describe badminton and the rules. This was to see if I could think on my feet (very much required in the role), stay calm when thrown a curve ball, could communicate clearly a concept to someone unfamiliar with that concept (again key to the role).
Got the job.
Another time I was asked about being involved in guiding and what aspects I enjoyed most. Again I tailored my answer to the role and got the job.
It's an incredibly competitive marketplace right now for jobs, you have to sell yourself and mark yourself out as above the others applying.