It sucks and it’s distracting.
Your hair and hands pop in and out of blur. Sometimes part of your face will blur.
I don’t care if your workspace is messy or your kid walks in the room. I do care that we’re all being distracted by your weirdly blurred hair and hands.
Given that many had to start WfH with short notice meaning they couldn't relocate to circumstances enabling a dedicated home office space blurry hair and hands are a very reasonable compromise.
I think you are overthinking it. I've seen people use it when it provides no real material benefit other than the placebo effect on the user to believe that the blur makes other people focus on their face.
But that's not always true tho, I have seen background replacement all over people's face (and yes, I seem to be the only one who thinks that's wrong).