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On the popular end of the slider, I'm being recommended The Witcher 3, Hollow Knight, NieR: Automata, The Witcher 2, and so on. If Steam has any intention of making this more than a fun little experiment, it needs some way to let people flag to it that, 'Hey, I own this game, just not on you'. I will say, though, that I like this system way better than having games recommended to me the old way.
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Her Story and Little Nightmares I would buy, as those seem to match my tastes the best, but I look at some of the other games on the list and say, "Steam, why would you think I would like Rocket League or Z1 Battle Royale?" The sweet spot for the popularity slider seems for me to be anywhere between half way and all the way to the right. If I move the slider all the way to 'popular' and set the release date for within the last 10 years, there's only a few games on there that seem interesting. However, if I move the release date slider to within the last six months, the number of games I'm interested in dwindles drastically. They all seem to have some sort of original edge to them. Out of those games, I've already played The Norwood Suite and The Fidelio Incident (thanks to Steam family sharing) and really enjoyed them, so I trust that I'll like Blackwood Crossing, The Works of Mercy, and The Spectrum Retreat. I play a lot of narrative-driven games that mostly fall into the horror and mystery genre, so pushing the slider all the way to 'niche,' while including releases in the last 10 years, gave me about 15 games that immediately piqued my interest.