It works great for some things, like the monkey people or Marverni's/Mictlan's shielded slingers. They generally have enough move points to keep infantry coming after them while the occasional stone hits something, and the shields help against archer fire.
Really, it's mostly about pulling enemy formations out of position than anything else. Against heavily armored front line troops, it outpaces them and harasses them backwards across the battlefield so your heavy-hitters can flank and surround them, while still providing the occasional lucky shot. Against lightly-armored troops, the constant supply of missiles will actually do a pretty decent number on the enemy troops, which helps balance out the fact that you won't be able to effectively lead them away quite as far.
And yeah, it doesn't work on flying archers because of the way the game handles flight movement, and the rather low movepoints flying units generally have because of that. Mounted archers, on the other hand, make very good use of it. Provided, of course, that they actually have an avenue of escape and aren't hemmed in by dense formations.
I also use it for javelin infantry on a flank, because it means they'll hurl their spears at the approaching enemy without immediately getting tied up by them and thus melting. Once they're out of ammunition they'll engage as per usual, but by that time the enemy is either in position for being flanked or is otherwise softened up by the javelin shots, without having too many try-hards from the javelin squad get caught in the friendly fire zone.
Also, a point worth noting is that they'll only retreat from their targeted squad, not from other troops moving in on their position. So if you've got a block with, say, "fire and keep distance archers", they'll target an archer squad and make sure they keep a healthy distance from their daggers, while completely ignoring the forward infantry line directly in front of them.