"Tumblr’s technical management needs have evolved to require types of experience that I don’t have"

That's is essentially exactly what Marco said. Not that he was incompetent exactly, but that he was not suited for what the CTO job at tumblr had become.

I don't think it's the Peter Principle though - he didn't rise to that position. The position changed as tumblr grew.

I agree that it's wise of him to see this and choose to step down; I've seen other companies suffer when the founding engineers were not wise enough to admit that the technicalities of scaling from a medium size site to a truly large one was beyond their experience.