If it's obvious that the microphone is on when speaking on the phone, why the need for the orange dot?

Only Apple could answer a 'why' question, and they do not participate here. This is all they provide. About the orange and green indicators in your iPhone status bar - Apple Support You can provide feedback to Apple by going here, Feedback - iPhone - Apple They do not respond to each feedback, but they read them all. That would let them know you find it unnecessary.

How does the phone know whether you are aware that the microphone is on or not? There are thousands of apps that can use the microphone. And you can even mute it when on the phone.