It's possible to generate almost plausible names in SQL alone (see #8). This extension is in the process of implementing a direct SQL approach. Each approach has merits:
Faker/API - This approach generates better output. Currently the SQL-generated names are still kinda garbage, and this impedes human review - a human reviewer will be much more able to identify errors and anomalies with "human-looking" data.
SQL - SQL is faster. The speed of iterating API updates against each contact just doesn't compare to a bulk SQL update.
A third approach is to reduce your test DB to a small subset, then use the "nice but slow" Faker/API approach to anonymize.
From years back, here's an ugly SQL approach to munging encryptDB.php output to produce slightly more normal names.
-- Drupal name column
UPDATE users SET name = CONCAT(LEFT(name, INSTR(name, '@')), '+', uid, 'example.net') WHERE name LIKE '%@%';
-- Drupal users table.
UPDATE users SET mail = CONCAT(LEFT(mail, INSTR(mail, '@')), 'example.net') WHERE mail LIKE '%@%';
-- CiviCRM email table.
UPDATE civicrm_email SET email = CONCAT(LEFT(email, INSTR(email, '@')), 'example.net') WHERE email LIKE '%@%';