It staggers/panicks everything in a certain radius, regardless of protection. Barriers, shields, it doesn't matter. It even staggers mechs, as can be seem in the video.
This opens them up for gunfire and leaves you completely protected of it.
Quickly looking at the video RedCaeser makes no use of this at all. (I looked with half an eye at it though, so I might've missed it)
In terms of staggers from squadmates, I much prefer, in no particular order: Pull Field, Throw Field, Full Cryo Blast, Flashbang Grenade. Pull and throw can have quicker cooldowns, Full Cryo Blast from Mordin is the quickest squadmate cooldown in the game, and Flashbang can temporarily overheat weapons.
I find Zaeed's inferno grenade to be erratic. It is one of the more damaging squadmate powers, but it its radius is not uniform so I find I rarely hit more than one person with it. And its damage is not enough to warrant it as an anti-armor power; Mordin's Incinerate is much better for that.
It can certainly panic organics, but so does Incinerate, which again I happen to find more reliable. Maybe I am just using wrong. But typically I find other squadmates more useful than Zaeed at any given time.