"Many people lost their progress while working online by accidentally pressing backspace and leaving a page," the extension's description explains. "So we removed the feature from Chrome, and created this extension for those who prefer the old behavior."
"Old behavior" is right. A little sleuthing on StackExchange has confirmed that the "backspace to go back" behavior didn't exist in Mosaic and Netscape Navigator, two early and widely-used web browsers. If anything, looks like the behavior might have begun when Internet Explorer inherited the backspace trick from Windows Explorer in 1995, with browsers like Firefox adopting it for consistency's sake. Anyway, there you go: if the backspace button has screwed up your workflow in the past, your life has changed for the better. And if you just wanted the backspace key to behave the way it always has, well, you're now whole again.
Arguably the more elegant solution here would have just been to include a toggle in Chrome's Settings page to enable or disable the behavior, but Googlers apparently weren't fond of that possibility from the beginning.
"There will not be a flag for this," said Peter Kastings, a senior software engineer on the Chrome UI team in late April. "We prefer that extensions, rather than options, be used to add non-default behavior in most cases." Bummer.