I don't think that's quite true. The efficiency merely falls to 100%. (The laws of thermodynamics demand it.)
Now, converting electricity to heat may not be as cheap as converting, say, natural gas to heat (thus making the heat pump un-economical when not pumping any heat)... but you do get heat out of it.
That's true. But heat pumps don't have the gross energy capability as a gas heater. To get the equivalent of an 85,000 BTU gas furnace you'd need to be pumping 25 kW through your heat pump at that point.
I think one reason heat pumps have become more practical is that homes are now better insulated, making 85kBTUs of heating capacity excessive for all but the largest houses.
Now, converting electricity to heat may not be as cheap as converting, say, natural gas to heat (thus making the heat pump un-economical when not pumping any heat)... but you do get heat out of it.