There are a lot of youtubers who make videos that target people who are sleeping with YouTube on. These long videos get recommended to them because they'll watch anything, ads and all, because they're asleep. The Spiffing Brit did a video talking about it. I think this feature might remove that meta.
I wanted to use it back in the day, but most instances didn't load. Even less often then regular Piped for me. I'd imagine that this wouldn't be particularly improved now that YouTube's doing their whole "Sign in to confirm you're not a bot" spiel
I've had issues with instances in the past too, but there's now a percentage next to each one displaying its uptime which I've found useful for stability.
Who is watching YT videos through this app? I occasionally run into it when clicking on a link on my phone, but I close it before the ads are through. Because it has become nearly as much ads as content, and is completely unbearable. If the video seem important or interesting, I may forward the link to my PC, where I can watch the video without ads.
The general populace at large? The amount of ads getting plastered and blasted makes me cringe when I see the non-premium YouTube app. I use adblock and also have premium courtesy of YT music subscription so I'm immune for the most part.
But, non-techy people do not know addblock is an option and also prefer not paying for subscription.