What counts as extreme?
The city in the video posted at the beginning of this thread is a disaster. The makers of this city were showing off certain aspects of the game, and mistakenly ignored this traffic problem. I'm not dissing the makers of the city, it was just a simple oversight that is now being overexaggerated and considered a "norm" when it certainly is not normal. The honest truth is that this round-a-bout/highway route is a functional nightmare. Plan your city just a little better, and you'll probably never see disappearing vehicles.
Can you give an example of extreme?
Take a look at this picture. Thanks PC2K for posting these very informative pictures, by the way.
Look at how far back that traffic line goes! That's a LOT of stuck cars. Check out the distance of this traffic jam. That's a congo-line of 200 plus cars that just aren't going anywhere.
Oh, and to add to the problem, there is no other way to get to that city section. No alternatives existed for those "vanishing" vehicles to take.
Can we still have traffic jams?
Of course! This mechanic isn't eliminating traffic problems, or magically curing them, and it's certainly not a cheat. It's an emergency feature.
I did some tests, and I had traffic congestion filling up 5 whole intersections in a city. Not a single vanishing car. I tested again on a highway, 67 cars backed up... no disappearing.
Your traffic problems aren't going away because of this feature.
What would happen if the mechanic was turned off?
The city in this video had the traffic problem on a highway. Without the mechanic, that traffic would have piled back into the city, effectively blocking every single intersection. No services or citizens would be getting anywhere, even if it was just a block away.
If this traffic nightmare happened inner-city, your city would flood so fast that your city would break and you'd go bankrupt, all your citizens would move away, and your buildings would all be abandoned before you could properly fix the problem. Even after you fixed the problem, your city would take a long time to re-adjust and fix itself.