Katie Sherwin from Nielsen Norman Group outlines a series of issues with using placeholder text in form fields. Some of the key problems include: short-term memory strain, the inability to check if you’ve filled in the right fields correctly, confusing placeholders for filled in fields and the increased difficulty of reading low-contrast light gray text that is typically used to style placeholders. Additionally, there are accessibility issues, such as some screen readers not being able to read placeholder text.
Certainly food for though if you’re thinking about implementing this UI pattern, though it makes me wonder if most of these issues can’t be solved using the adaptive placeholder design.