Recently I was involved in a project where SP2010 was being used as a document management system part of which used the above feature. The consultant who initially implemented the solution had taken a simpler approach of routing documents to root folders and the client was happy. After a period of time however the client reported that all the documents had disappeared from the libraries although they are still appearing in search-results.
SharePoint limits the number of items that can appear in views to 5,000 and if a folder exceeds this limit then it does not show any. Had the items been organised into subfolders so that no more than 5K items were stored in each then there would have been no issue even if the library had far more items in total.
There are a number of solutions to this problem and the obvious choice would be to alter the routing rules and to use PowerShell scripts to organise existing documents. This was not possible in this project because the rest of the solution, including custom workflows and event-receivers, would have required changes and that would have been far too much work for a system that was live and operational.
When designing a document management system, due consideration needs to be given to the volume of documents that might be created over time including their retention requirements, otherwise rework later on may be too expensive. In this solution a decision was made to rely on search functionality instead of scrolling through thousands of documents. The view limit was turned off but this can cause other performance problems and so it may have to be turned on again.
Content-types should be used to store meta-data instead of using subfolders as meta-data but these items may still require subfolders when large number of items are involved. Document Organizer supports limiting of items and creating folders as needed.
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