Yes, that's somewhat the point. You can see it in action in this comment. Rather than replace, it allows people to see a Piped link too instead of YouTube one.
Piped can be more privacy friendly in a few cases, as you don't need an account for subscriptions or playlists.
Here are some differences to Invidious:
Subscriptions don't necessarily require an account
Playlists don't necessarily require an account
Piped supports Infinite scrolling
Piped supports Webm videos
Piped can stream videos from Odysee if the same video is available there.
Piped is a lot lighter on the server
Piped always proxies your traffic to Google's servers (most Invidious servers don't proxy videos to YouTube by default)
Piped has SponsorBlock integrated (DeArrow will be added soon)
Piped has ReturnYouTubeDislike support via RYD-Proxy
Piped can only be self-hosted on a server. Invidious on the other hand can work fine on local networks.
Piped is a lot easier to administer than Invidious as an instance operator.
I'll conclude by saying that I was once an Invidious user. I decided to write Piped at a time when Invidious was riddled with extremely odd bugs and performance issues. Some of these issues still persist to this day. I've always kept performance a top priority in Piped. I wanted to create a better alternative to YouTube than Invidious for my use case and threat model. I think I have succeeded in that :)
Currently, it scans all posts that are federated with my Lemmy instance (feddit.rocks), however, there are very few communities that it is scanning currently as there are very few users who have subscribed to communities on my instance.
If more people register on my Lemmy instance and subscribe to more communities, it will scan those communities as well.
I hope more users register on my instance so it can be listed on https://join-lemmy.org/instances too :) I currently lack the 5 active users requirement for that, unfortunately.
Alternatively, I could maybe add a way for people to get the bot to subscribe to a community, so people from other instances can add communities to be scanned. 🤔
You can now try sending it a message mentioning communities in the format !community@instance.tld and it will try joining it :)
No, you don't have to self-host it. You have a large number of public instances hosted generously by people! You may want to however self-host it however if you don't live close to an instance, or want to actually own your own data.
Are there instances out there that this redirects to or a single server?
You can switch instances directly from the preferences page. You don't need to change your URL for switching instances.
Is it a sort of P2P thing where different servers host different videos or parts of different videos?
No, Piped has no P2P aspects at all. What you describe is technically infeasible/difficult since we don't store videos at all, just proxying them.
How will this be affected by Youtube cracking down on adblockers?
Time will tell, so far we aren't affected. But, we could be affected when it fully rolls out rather than as an A/B test.
Piped uses the Odysee sync API to find YouTube content already available there, and if so stream it from there. This is also written in the readme on the GitHub :)
You can just change the hostname, for example, youtube.com to piped.video. Alternatively, you could just use something like Libredirect to automatically do it on your browser.
I don't think the current Lemmy clients allow hiding bots, but if they really bother you/people that much, it should possible to add options to hide bots altogether.
I currently host the official instance, which is entirely run by donations. However, there are many community instances people can switch to in the preferences menu on the site. They are listed at https://github.com/TeamPiped/Piped/wiki/Instances
You can now try sending it a message mentioning communities in the format
!community@instance.tldand it will try joining it :)