I group my tabs in separate windows and let my window manager take care of managing them. Maybe this is good in some Chrome OS style netbook? Sure, the contextual search (or whatever it was) seemed cool but elementary tasks like organizing my tabs/windows should be simple. Soon I'll have to switch my mental mode just to get my head to this fancy tab-organize mode.
One nice thing about Tab Candy is that it's invisible until you choose to use it. You can use tabs and windows just like you always have, and nothing will change.
Watch ten different people use web browsers, and you'll see they have very different usage styles. Tab Candy addresses some problems experienced by many but not all users, and does it without impacting the others. (You could say the same about virtual desktops in X11 or Spaces in Mac OS X.)