It's not camouflage for ships, it's so it's harder to estimate the distance.

Not just distance, class (ie type of ship), speed and direction too.

Having seen some freaky good examples, I'm not sure how it wouldn't work? It might not matter, but it seems to work (and I can't see how it wouldn't matter)?

For example, you see a ship on the horizon, you can't tell the class - so whether it's likely to be in a group, or if it's a ship previously reported in this area - you can't tell the direction, etc ... you observe the ship, now you can plot the direction, speed. The ship fires on you, now you likely know the class.

I understand, but like I said, it never really worked.

Dazzle isn't meant to hide. Dazzle is meant to confuse a human trying to estimate course and speed in order to send an unguided torpedo at it. You need to look at hit rates to judge effectiveness.

We don't have that data. All we have is conversation from former captains saying it didn't work.

EDIT: Also, IIRC, the most successful captains in the field didn't actually use the AOB method of determining the target's course. They would instead cross in front of the ship at a distance. When the ship's masts lined up they knew the ship was pointed directly at their current position and could calculate from their current bearing and the bearing to the target exactly what the target's course was.

In hindsight what the Brits should have done instead of odd paint jobs is offset their masts by a few degrees.

But does that mean dazzle doesn't work at all, or does it mean a successful counter existed?

It's more like the British made a counter to a process in the German manual, but the Germans weren't using that process anyway.

The article says that its already known to not work against human drone pilots, its specifically targeting AI-piloted ones

By "drone operators" I meant organizations that operate drones, not necessarily pilots. I would be very surprised to discover this sort of paint scheme threw off drones in any meaningful way. I've seen video footage of drones automatically identifying and bracketing vehicles painted this way.