The default layout of File Explorer adds additional padding between elements. For users who prefer a more information-dense layout, there is a setting in View Options called “Use compact mode,” which will restore the classic layout of File Explorer
It's to make it easier for those using touch screens.
It doesn't help me with the touch screen either, with the size of my fingers I'd still hit 3 lines instead of the one I want 😆
I have to use a rubber stylus anyway with the touch screen, so this new default layout is absolutely a waste a screen space. 😜