I have never driven a hybrid, but my engineering experience tells me that the only way you can get more out of a tank of fuel is by improving the efficiency. Every time you convert energy from one form to another there are losses. When you convert chemical energy to mechanical energy there are efficiency losses.
You're right about the losses involved but they are more than compensated by using a smaller ICE a hybrids allows (1.3 instead of 1.8 l). It would take a standard ICE of 1.8 l to match the same torque between 1000 and 3500 rpm like a 1.3 l hybrid. Above 3500 rpm the 1.8 l wins because the electro engine looses torque. But for a car from A to B these rpm regions are pretty rare (overtaking). In cruising mode (keeping 30 or 50 mph) the 1.3 consumes much less fuel than a 1.8, given the same car. Those +- 40 kg which the hybrid system adds to the car are only a small fraction of the weight of todays cars (2-3%).
The electro engine is mainly/only active during acceleration and adds around 50% of torque (even more in a Toyota) to overcome the low torque of a small but efficient 1.3 l. But 170 Nm feels like a 1.8 l to the driver. While braking you get part of the energy back for the next accelerations.
The key of the lower fuel consumption of all hybrids is basically the use of a smaller and thus more efficient ICE. If you drive a hybrid as it teaches you to (let it roll, lift the throttle, using the brakes rarely or only for a complete stop) you'll reach a lower fuel consumption than with a standard ICE. If someone drives a hybrid like any other ICE which is more or less 'digital' (0 or 1) he bought the wrong car.
He will still reach higher mpg with a hybrid but the hybrid is capable to reach a territory of mpg numbers a standard ICE will never see.
One example: my former ZE1. Took the car over with 35 k miles and 50 mpg, Honda says fuel consumption is 70 mpg, I finally got 78.6 mpg lifetime (over 60k miles) and 89 mpg for the very best tank in summer. Not to forget the 30 miles trip from home to home (with one cold engine start) with 102 mpg.