He might practice kata but his timming , distance and visual speed anticipation comes from years of competition and training for tournament karate.
http://m.fightland.vice.com/blog/karates-holy-trinity-lyoto-machida-semmy-schilt-and-andy-hug 
The muscle memory comes from years of competiting in tournament karate and yes sweeps are allowed ....The muscle memory for kata is almost completely different.
The major difference is "aliveness" in sparring or training with resistance.
Typically, TMAs have "deadly" techniques; as was mentioned the 'pressure testing' - how would you test, much less practice, something potentially deadly? Basically, by not using full power against a resisting opponent.
When something is made into a sport, it takes away deadly techniques and substitutes relatively safe ones that CAN be practiced at full power and resistance.
Sometimes, we see the pendulum swing too far the other way and sports becomes too "safe" or introduces arbitrary rules. What you end up is with very tough athletes adept at dealing with aggression and an opponent trying to really win... but with holes in their game because their given sport deemed something that CAN be practiced safely as illegal or outside the bounds of the sport.
An mma black belt hahahaha 
The theory that Kano put into practice in developing judo was full powered practice. That is why some TMAs don't work well - they can't be practiced full powered under live conditions.
Maldini2706 - ....……………OK
X 28(once every 13 seconds) lol
Much like you must be proficient in the gi , to be a good grappler; You must be proficient in kata to be a good striker
Has more to do with how you train.
One of my friends just said;
"Don't these points more accurately mean that bad practice doesn't work, rather than the martial art not working?"
Which is pretty much exactly what I'm getting at, but wanted to explore some of the points a bit deeper. Like when people say traditional martial arts don't work, they forget the reasons and the culture at the time it was born. Not that any martial art starts "complete", but in times of strife and oppression your ability can mean the difference between life and death, not just 1st or 2nd place trophy, there is much less room for McDojo's.
was Tai Chi developped to defend someone's village. there are other benefits of martial arts that aren't relative to other people. maybe define "work".
maybe it was but i make my point
"A frog in a pond knows little of the great sea"
Whatever your base is - make sure too train with others - not to learn their "style" but to adapt yours against them.
And adapting your style is not the same as altering. Lyoto Machida is a pretty straight up shotokan guy but he has adapted his shotokan style for fullcontact mma fight..
A wise friend/teacher and perhaps the best fighter I ever known once told me. Train with and against as many people that you can. Learn from them - use the things that work for "YOU" and leave out that isnt for "YOU". Remember that the best techniqes are the ones that work for "YOU"...
Aikido
And something I wouldn't even call a martial art: Systema
A better title would be, why traditional martial arts don't work agains't the .1 percent, best fighters in the world. And the reason being that those fighters are extremely well rounded. However, even that statement is debatable. I've trained in two traditional martial arts, jiu jistu, and taekwondo, and both seem to have "worked" for me based on their purposes. I have successfully been able to defend myself on two occasions of being attacked.
To aurgue that traditional martial arts doesn't work I think is insulting to a lot of people (including myself) I spent 10 years getting my black belt in a traditional martial art and 5 years training in another. And it has "worked" for me just fine thus far.
the problem is the varying definitions of "work". If by don't work, you mean I'm going to run into dan henderson on the street and he's going to beat me up, than in that sense you are right. But traditional martial arts don't claim to work in this way. They simply train you to defend yourself in most situations.
Like a lot of others are saying, it has a lot to do with how the TMA is taught. If you're not put in combat situations you won't be able to fight. "Chaos is a matter of perception".
Our school is mma/ bjj / and shidokan karate. Initially everyone (my self included) thought karate was stupid until one class and immediately realize it has its place as either a great base for martial arts or to supplement whatever other art you're accustomed to.
Dumb
firstrodeo - great point, in my video I mention that some systems are designed for internal benefits. The first thing that springs to mind is the 8 piece brocade.
sabaki - love the frog quote.
sidron - I fear not the man who knows ten thousand kicks, but I fear the man who has practiced one kick ten thousand times. Also loving the bitch slap example, and it's right.
austin - I picked that title because it's the phrase I heard over and over
DDDD - I agree, when there is no longer a need to fight to live, bs can find a home and pollute the environment.
Its How you practice your art.
Shotokan can be a Very traditional art ,if any of you guys have really trained Shotokan,then would know That The way Machida trains and prepares for fights is complete opposite to What goês on at any JKA Shotokan dojo around the world.
Traditional Shotokan usually does not consist of wearing gloves and hitting pads or hitting heavy bags or sparring in The way Machida does.
The fórmula in which machida trains his Shotokan is Very similar to How MMA Fighters train today and prepare for fights.
It is totally The opposite as to What actually happens at most any Shotokan school around the world.
Gichin Funakoshi (the Founder of Shotokan) would never have recognized
Half of anything machida does in training as Being Shotokan.
Machidas Shotokan hás been altered,changed and 2.0 'd for MMA.
I've always thought that the main issue as to why traditional martial arts don't work in MMA are more in how they're trained. They don't often do live training so it makes the moves far more difficult to apply. That said, there is something to it. If you look at some of the best strikers in the sport's history--Bas Rutten, Anderson Silva, Anthony Pettis--they all started with Tae Kwon Do. I think it can build really good attributes