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According to Reddit…so, grain of salt…that is an urban legend, related to a Neil Gaiman short story that appeared on the Matrix promo website.

https://www.reddit.com/r/movies/comments/1amree7/theres_a_wi...

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It exists and is a great read – https://matrix.fandom.com/wiki/Goliath

Check the archive.org link at the bottom!

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I think we the urban legend really sticks around because the compute explanation just makes much more sense and we all want this beloved movies not to have a sill (albeit inconsequential) plot hole.
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Oh, totally, it’s my head canon as well.
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Mine is either that, or, the idea I mentioned in this post:

https://news.ycombinator.com/item?id=47185076

Machines trying to be benevolent, but overly controlling.

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That's very good.
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I like to think the machines actually were using them for processing power, and the humans themselves just misunderstood (or oversimplified for Neo) what was actually going on.
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Processing power is my second favorite explanation.

My first favorite would have been: they don’t use the humans for anything, the pods are just the most efficient way to store humans. The machines think they are being benevolent, just want peace and quiet and for humans to stop doing dramatic things like scorching the sky. But I don’t know where the plot would go from there.

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There is backstory that the films could have gone into, though I don't know if it was written before or after the first film. The humans in the matrix were allied with the machines and they put them in the matrix to protect them from the war. They were being benevolent.
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They benevolently feed the dead to the living
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What the humans thought they knew came from the Zion archives mostly. And guess where the Zion archives came from…
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