The use case we're all familiar with is that the YubiKey acts as the second (physical) factor. In that use case, this is great, because now you can opt to make the login three-factor: something you know (password), something you have (the fob), and something you are (your fingerprint).
However, Yubico has also been pushing the password-less login angle. If you look at the FIDO 2/WebAuthn standards and the new capabilities in the current generation of YubiKeys (YubiKey 5's), there's a new capability called a resident key. This removes the dependence on passwords entirely. Currently you can protect that key with a password. I believe this new thumbprint reader allows you to unlock the resident key with a thumbprint. That's what would bring it to parity with built-in thumbprint readers on laptops.
Passwordless login currently exists in the form of thumbprint readers (like on Thinkpads and those Samsung phones that recently showed they had a major flaw) and face recognition (laptops and phones). In the case of facial recognition, I think the convenience benefit is worth the security tradeoff. However, I'd be nervous about using passwordless fingerprint authentication on my YubiKey because that thing is so much easier to lose track of, and I don't trust fingerprint recognition.