This only hides content locally for Threads users, it doesn’t affect visibility from any other fedi platform. It’s not that different from a Lemmy instance downvoting a comment to the point of being auto-hidden; it still exists but requires an extra click to see from your instance, and the rest of the fediverse can access it normally.
I disagree, you can see so much on the old layout specifically because it’s a wall of text. The new layout is unnecessarily bloated and takes up your whole screen on every device you view it from, so you can barely see more than one or two posts at a time. It removes the ability for the user to freely scroll and look at things that interest them, and forces the user’s attention onto exactly what the algorithm wants them to. The new layout removes a ton of agency from the user.