again, those are both workarounds. yes, they "optimize" the game in the sense that it runs faster, but they are not actual optimizations to the code.
if you know anything about computer science, you know that programs/algorithms are typically analyzed in terms of run time, typically using big-Oh notation. the kind of optimizations i'm talking about would be, for example, to rework an algorithm to reduce it from O(n^2) to O(nlogn). this would actually make the game faster, allowing your video card to render those far distances without the need for a hack like fog.
did valve go through their code and improve the efficiency of every method, use the best algorithms, data structures, etc? i have no idea. i don't work there, haven't seen the code, etc. it's quite possible the code is as tight as it can be and fog is a necessary workaround to make the game playable. but, at the same time, valve could've been pressed for time and just used any algorithm they could think of and the code is an inefficient POS. in that case, they threw in the fog because it's faster than ACTUALLY optimizing their graphics engine.
long story short, neither of us can really know how well written (algorithmically) the Source graphics engine is. but fog and reduced render distance are, as i said, just hacks or workarounds used when the engine is not efficient enough, whatever may be the cause.