A short while ago - just before Christmas - I started using Instapaper to save long articles to read later, offline. It was so useful and so easy that I immediately went looking for the video equivalent, and found PwnYouTube. Now, a few months later, I can hardly imagine my life without it, because I frequently come across videos I can't watch right now (because I'm at work, or they're too long) but I have plenty of time to watch on the train ride. The problem, mostly, is that when I have the time, I don't have the video and vice versa. With PwnYouTube, I can download online video, copy it to my phone and watch it later. It's perfect, so I expect sooner or later it will be destroyed by copyright claims or other legal difficulties. Obviously, giving me the ability to watch more videos I would previously have skipped completely is a terrible business model for YouTube.
YouTube do have their own "Watch Later" service, but you have to be online with a YouTube account for it to work. The appeal of downloading the videos, to me, is the ability to watch them offline later. Until the official service provides that capability (perhaps via a phone app) then I won't bother, because what I have already works much better than that.
Mokalus of Borg
PS - I doubt YouTube will ever offer an offline view later service.
PPS - But if they want to display ads and compete with this third party service, it's the best way.