Why are apps divided into Intel or M1 based types if universal binaries exist?

My experience is that VLC is an outlier: most developers produce one Universal Binary app for both architectures, and that's what Apple recommends.

The only benefit to the user is one of file size. A Universal Binary contains 'the other' binary that your hardware can't use, so it's going to be around twice the size that you need.

There's more work for the developer in maintaining separate builds. However, it's possible that cross-platform software (written for Windows, Linuxes and MacOS) has systems in place to handle producing different builds from the same code, so they're geared up to do that anyway.

Ultimately, why a dev does something is a question only they can answer.

The main question I have is why do these sites separate their apps into the two categories based off of your chip type if they can just push out universal binaries?

While it is a easy (and recommended by Apple) way, it increases the size of the program. Because it is actually both of the installers under a single wrapper.

Other questions that stem from this are pretty much around why does this app only supports X chip types? - Somewhat similar to saying 'This program is designed to work on AMD cpus but not Intel cpus.'

The comparison of AMD and Intel and Intel and M1 is between Red Delicious and Golden Delicious and Apple and Orange. What Apple say to be Intel is actually x86 ( amd64/x86-64 to be precise) ISA. AMD and Intel are just different manufacturers. Only programs to claim support for one if it is something to do with chipset or such low-level vendor-depndent harware part or vendor developed features (3DNow!, AMD-V, Vt-x). There are many hackintosh in the wild running on AMD. M1, on the other hand, is designed by Apple in-house, based on ARM ISA. So, they are incompatible. They does things differently at machine code level.