Every spandex rider you pass is pretending?
I will say to a first approximation, 100% of the RadioShack lycra liveried carbon fibre Trek riders I see riding through Sydney traffic on a weekday morning are _not_ Lance Armstrong class riders.
(Not any more than I'm a Carl Fogarty or Troy Bayliss class motorcycle racer when I put my racing leathers on and fire up my Ducati Monster...).
It's mostly posing and toys, with an unhealthy dose of brand snobbery and wealth signalling (and being brutally honest, I'm guilty of a little bit of both of those myself - no matter how much I protest that "My Ducati is just a fun toy! I;m not a brand conscious poser! Not like those _other_ Ducati riders...")
I imagine a nice lycra suit would actually be comfortable. I don't know, I go with jeans and a T-shirt (when the weather is warm enough for that) but proper cycling wear should help with chafing down there as well as stopping your clothes from dripping sweat while still keeping you warm enough for when you're starting to get exhausted or the weather gets chilly. These problems exist even for non-sporty people cycling to work as long as they ride fast enough for their bodies and have a long enough commute...
Toys? I guess. I would say all hobby equipment is toys.
The pro-style clothing isn't posing or brand snobbery. Jeans are way too hot, cotton clothes get uncomfortably sticky from sweat way too fast and let cold wind go through them. Proper bike clothes allow me to feel comfortable for a long time and won't get me sick.
As for a good bike, it's just a better experience. I've owned a bunch of different bikes, starting with a old soviet fixed-gear Školnik, and ending with my current Trek road bike with fancy gear. Everything about riding the Trek is better than any of my older bikes. The gears change in a smoother fashion, I can roll on without cycling for much longer, and the effort-to-speed ratio is much better, allowing me to reach way higher speeds than ever before.
I get the "owning nice toys" thing - I even get the guys who are 20kg overweight spending $5k+ to get a bike that's 2kg lighter than a bike that costs 20% of that. To me though, it starts seeming weird when they do that while dressed up in sponsor logos for companies that sometimes don't even exist in this country...
(And it's not just lycra wearing mamils either, I don't get the motorcycle riders who paint Repsol livery on their Honda or Aruba or Xerox logos on their Ducati...)
One thing you may not know is that logowear is like 90% of available men's cycling gear. There's an element of market failure.
From what I've heard (never been there) Australia is about as close as it gets to the perfect society... except they hate cyclists like the plague?
Hahaha