Don't know how this works on other bikes but when comparing all sorts of hybrids before buying mine I noticed the "medium" or less frames had 170mm and medium or large and up had 175mm.

Why would someone real tall like 6'3" or even me at 5'11" be using a crank that's like 3/16" longer, 3/8" bigger dia. circle vs. the one someone 5'6" would be using? Shouldn't they go up in size bigger than that with each frame size? Does it really matter? Do people buy bigger than 175mm to upgrade a bike? If so does if give a significant advantage?

One of my commuters has 170mm, the other 175mm. I do not notice the difference - which unfortunately is compounded by 37-590 vs 32-630 tires, and 39-52 vs 34-50 chain rings. Both bikes have the same Sunrace 13-25 7 speed freewheel though

It doesn't matter. There are more variables that matter than just height or leg length... the sizes that you find common for a given frame size is just a ball park.

Consider that a variation in crank length will result in a change in saddle height. The combination of saddle height along with crank length will cause another variation in where your knee sits relative to the horizontal centerline of the frame.

Bottom bracket height, or drop, is yet another variable to consider. All of these things will contribute to how you are balanced on the bike as well as the efficiency of pedal stroke.

To put it another way, there are no general correct-sizes, just ball park estimates... you need a professional fit to get everything at an optimal length, and even then, there is no one "right" size. If you want to spin more, you get shorter crank arms. If you want to mash more, you get a relatively longer crank arm. How long or how short, is more or less personal preference.

You'll generally find that mountain bikes will have longer cranks which gives more leverage.