It is superior to all other ways I've seen in usability, which is ultimately what counts, and integration takes all of two minutes, much less than traditional password auth. Plus, you don't even need to secure any passwords.
I really, really hope it catches on, and Google/Yahoo!/other mail providers start supporting it.
Have a read through Kim Cameron's post [1] to get a feel for how naive, if noble, Mozilla's efforts are.
That said, I wouldn't go as far as dreamdu5t in suggesting that we as a community stop working on alternative solutions. I work on Persona and think it's fantastic, but no identity system is a panacea.
Of course, I would really love to read a more thorough post from the author regarding his decision to roll his own system.
PS: ecaron, I think I owe you a coffee and a much belated email. :)