While I'm sure this will help some people use git to address a use case that was previously impossible with git, I can't help but feel that it a bad step overall for the git ecosystem.
It appears to centralize a distributed version control with no option to continue to use it in a distributed fashion. What would be wrong with fixing/enhancing the existing git protocols to enable shallow fetching of a commit (I want commit A, but without objects B and C, which are huge). Git already fully supports working from a shallow clone (not the full history) so it wouldn't be too much of a stretch to make it work with shallow trees (I didn't fetch all of the objects).
I'm sure git LFS was the quickest way for github to support a use case, but I'm not sure it is the best thing for git.
I would love to see a Google Piper for git that load files with a virtual filesystem in FUSE as you access them.