Why are relational set-based queries better than cursors?

--Cursor
DECLARE @phoneNumber char(7)
DECLARE c CURSOR LOCAL FAST_FORWARD FOR
   SELECT PhoneNumber FROM Customer WHERE AreaCode IS NULL
OPEN c
FETCH NEXT FROM c INTO @phoneNumber
WHILE @@FETCH_STATUS = 0 BEGIN
   DECLARE @exchange char(3), @areaCode char(3)
   SELECT @exchange = LEFT(@phoneNumber, 3)

   SELECT @areaCode = AreaCode
   FROM AreaCode_Exchange
   WHERE Exchange = @exchange

   IF @areaCode IS NOT NULL BEGIN
       UPDATE Customer SET AreaCode = @areaCode
       WHERE CURRENT OF c
   END
   FETCH NEXT FROM c INTO @phoneNumber
END
CLOSE c
DEALLOCATE c
END

--Set
UPDATE Customer SET
    AreaCode = AreaCode_Exchange.AreaCode
FROM Customer
JOIN AreaCode_Exchange ON
    LEFT(Customer.PhoneNumber, 3) = AreaCode_Exchange.Exchange
WHERE
    Customer.AreaCode IS NULL