If you have any experience with Seed of Corruption, it works a bit like that. The AOE doesn't actually hit your target. It hits every enemy around your target. That's where the similarities to Seed of Corruption end. Mind Sear is channeled AOE, focusing on your primary target. If your target dies, the spell stops casting.
That last part is the big issue with this spell. If your target dies, the spell stops. This means if you have other people in your party casting AOE spells, or even the other DPS in your group choosing your target to assist train, your AOE isn't going to do a thing. That really sucks! So for example, you know that room in Magister's Terrace full of mana wyrms? That's a place where your AOE is going to be really, really lackluster unless you're the only person in the party DPSing and/or casting AOE spells.
You can work around this by marking a mob using raid markers and saying, "This is my wyrm, jerks. Back off." That doesn't work so well in situations where the mobs come in waves, but it's a decent enough fix in 5 man dungeons.
Where this spell really shines is situations where a pull has one or two big elite mobs, with a bunch of non-elites with them. For example, Utgarde Keep has pulls with a an elite vrykul and a bunch of non-elite weaksauce undead. This ability works very well here. Load up your DoTs (we have three now!) on the elite, then channel Mind Sear on him. Your DoTs will tick away at him, and your AOE will take out his friends.
Another fun thing you can do with this spell, is you can target something that's been Crowd Controlled. A Sheep or a Shackle can be your primary target, and you'll damage everything that's actually part of the combat. That's really only a novelty, though. The CCed mobs probably should never, ever be in AOE range of the rest of the stuff. Especially considering all tanks have AOE abilities now, limited target or otherwise. They'll be pulling their mobs away from the crowd control.
Now let's talk damage. I won't crunch a ton of numbers here or compare it to X class and Y ability, I don't think that's particularly necessary. If you're interested in that kind of stuff though, there's ShadowPriest.com and Elitist Jerks. They likely have what you want.
My Shadow Priest on the Wrath beta currently has just over 1400 Shadow damage with Inner Fire. At 80, I'm still wearing most of my Sunwell gear. Soloing out in Icecrown, if I cast Mind Sear with no Shadow Weaving stacks up, it starts hitting for roughly 850 damage. Every time Mind Sear ticks and hits targets, Shadow Weaving starts piling up. You'll get to 5 stacks very, very quickly. It ticks every second for five seconds (and it is modified by Haste), so that's pretty good!
Is it as good as Mage or Warlock AOE spells? I don't know, I honestly haven't checked the numbers. Is it a good spell on its own, though? Situationally, yes. In the situations where this spell shines, it is fantastic. In the situations it isn't? Well... there's Holy Nova? Heh.
I actually use this spell soloing quite often, too. I pull 3-4 mobs, load them up with DoTs, put Power Word: Shield on myself, and Mind Sear away. They eventually chew through my shield, but Improved Shadowform and the pushback changes makes it not that painful when it happens.
So despite the hate on this spell, it's good. It has its uses. It's not as flexible as other classes' AOE spells, but those classes can't do everything that Shadow Priests can, either. I can live with Mind Sear. Oh, and before you guys make fun of me for using Mind Sear on only one target in the picture up there, I did that so you could see how awesome it looks.