How many times have you found yourself shying away from a site because you were worried about what they'd do with your credit card number? This isn't a perfect solution (especially with the limited pool of numbers), but it's nice.
If I had a local bank it wouldn't have been much of a problem as I would have been able to withdraw funds in person. I agree that chargebacks are pretty easy but in my experience the card itself had to be canceled and reprinted causing an inconvenience. Luckily I have credit cards for emergencies such as this.
All things considered it wasn't a huge deal to me personally but I could see how fraud could potentially be quite the problem for some.
Edit: To add, I also needed to print out, sign, and fax an affidavit form for my bank along with a scan of the card itself to prove it was still in my possession.
It happened to me but I got lucky with my CU's fraud detection (froze the card after 2 hours), but took about 8 hours of my time to sort out. Now when I'm at that random liquor store on the corner I tend to ask myself, "Could this be another compromised card reader?"