I was just thinking about Escape form New York and one of the driving elements of that movie is how Snake is infamous and has a reputation and everyone thinks he's dead.
I suppose it works in much the same way as cowboy movies: it is implied that the character is badass more than it is shown to the audience they are.
It's a nice story device because it lets the audience use their imagination -- which is always more vivid than seeing it. But it's also a way of being economic: to not clog the story up with too much back story, and to cut the special effects budget down a bit because you don't need to show the action.
But it makes me wonder if this is something used more in movies than in #books. It's clear the movie industry would adopt any trick that would cut costs, but books don't have to so much.
However, I imagine it's used in books just as much.