This feature has been extremely useful for me many times. If you search for a lot of technology-related documentation like me, you usually rephrase your question many, many times before you get results that really address what you searched for.
Recently, I was looking for a way to flush the linux disk buffer, so that some measurements I performed could start with a completely cache. In my search history, you can see how my queries started with the naive "how do you flush disk cache in linux?", morphed to "generate huge file linux bytes", before my searching ended with "dd /dev/zero/ of count". A couple of days later, I may have forgotten the last query, or the URL of the site that led me to, but will be able to reconstruct it from the search history record.
In addition, Google has recently added a Trends feature that compiles your search behavior into nice charts. Using these, you can easily track your own life. For example, the "hourly search activity" graph will seem like a chart of your waking hours.
Clearly, this is not a product for people worried about privacy. Myself, I will really start worrying once the ads next to the search results start to unexplainably be tailored my interests. Until then, I should go to bed earlier - as the chart suggests.