Pop, I totally agree...after reading several of the YouTube comments, I was amazed at how many people are baffled by the effect. Plus, there are several comments from those who may have been in the know, but who still thoroughly enjoy the routine!

This is a special variety of trick. It cuts into a spectator's preconceptions of magic and methods, and lays waste to them.

The effect isn't really "strong" magic, but a magical, cartoony, mechanical line of thought that leaves people "bewildered."

What people start out "knowing" is slightly wrong, and with a little push, their thinking can be made to trip all over itself--like in a cartoon where Wiley Coyote's complicated machine goes awry.
Events begin to go in amazing directions. What the spectators thought they knew seems impossible now, and it becomes too complicated and bewildering for them to reconstruct where they went off the rails.

I think the "Chinese Sticks" is another example of this sort of effect, and "Professor Cheer's Comedy Rope Trick" is another.

These are almost invariably comedic in nature.

I have personally never liked the effect because it is just done so poorly by so many. Heck it was an effect taught on a reality tv show.

But my feelings aside when this is done well it indeed fools an audience and absolutely entertains them as well. A great deal of that has to do with exactly who is performing the effect. But then again this can be said of all magic, of all songs and so forth. It is the artist that makes it art.