I've driven roads where the GPS swore the speed limit was 20 clicks slower than the signed speed limit. It is not necessarily safer to drive significantly slower than the posted speed limit, since most traffic will be doing at least that and relative speed differences are a contributor to surprises/crashes/injuries on the road.
The reason for using a density range, is that if the cars are too dense, there is likely traffic, and if they're not dense enough, you'll either have outliers skewing the data, or people driving faster than normal, due to the lack of other cars.
[1] When you're using Google Maps, google crowdsources data on how fast traffic is moving, based on all devices using Maps in that viscinity. You can infer traffic density based on sampling the number of people in a given area providing data. I assume that this data would only get more granular as time goes on, as we add crowdsourced data from autonomous vehicles as well. https://googleblog.blogspot.com/2009/08/bright-side-of-sitti...
Sometimes the signs say 00 in no traffic lol (I think during testing..?)
I can imagine a "smart highway" where the signs broadcast the current speed limit...and hopefully broadcast the current speed.