This UI would be similar to Windows 7 Windows Explorer's location bar, which shows "breadcrumbs" of libraries or folder directories by default, but changes to actual filepath upon click.
IMO, it is a better way of navigating around. If I'm wanting to go a child of a folder three levels up, I just click the little arrow next to the appropriate parent, then choose the child. As opposed to up-up-up-scroll-click.
Plus, I still have the option of manually editing it, if I so choose (but that takes an extra click).
It took me forever to notice the "search" box, though. That's another really nice feature, once you get used to it.
With the new system, the parent button (i.e. "Up", as NumberFiveAlive pointed out) is always in a different location, labeled with different text. How confusing! Microsoft replaced the notion of "I want to go up" with "I want to open folder X". Great for new users, not great for me.
The new system makes a lot of sense for people who don't understand nested file-systems and just want to open Folder X... "oh look, there it is, click". Also, the old Up button doesn't make a lot of sense in the context of a hierarchy laid out horizontally, so I can see why Microsoft would want to revamp their interface.
For those of us who do understand that directories contain other directories, the option to enable the Up button again would be a welcome "new" addition to the address bar. Sometimes it's more convenient to click on a button than to reach for a hotkey.
You can pick and choose what options you want. My explorer is currently configured to be a bit of a cross between Windows 7 and XP.
I'd use it.