Datamoshing is one effect that I don't think I'll ever process as an effect instead of an error (and as a result, I don't like it). My brain simply won't process it as "effect". I think it's from my history of downloading videos that had errors which produced the effect. Especially back in the slower less-reliable internet days, it was always soooo annoying to have spent hours downloading something only to have a glitch that caused the datamoshing effect. Plus, now all video I ever watch is digital, so I'm never totally sure that there wasn't a streaming issue or if it was intentional, unless it's being used heavily as an effect over and over and I see it enough in the same video to realize it's intentional.
At least the comment is correct: "It's used to add a touch of psychedelic flair to your shots or to hide the fact that you accidentally deleted half of your footage."
Datamoshing is just reusing the motion tracking done by video codecs intended to provide compression in unintended ways.