Because Hiking and Walking are two different categories in Garmin's system. What is the reason behind that, nobody will tell you, but if you want your hikes counted as walks, simply select the Walking activity instead. It makes no difference (ie the same screens, the same Calories, etc.), except that the Walk activities will allow you to get the Walk badges and Challenges.
The FR735XT doesn't have a native "Walk" app. "Hike" seems to be the closest option, and if one wants it to count as walking, manual change of activity type after upload is required.
