Though mods were nice, it was a bit of a pain to upgrade a live forum, enter the extension hook system. Extensions were born out of necessity, though I think it's being viewed as the second coming and a way to turn PunBB into something it was never intended to be.
I don't think that the extension system is the "second coming", but I do believe that it will give the users an easier way to mod their forum, if they choose to do so. Having to edit the core code was always difficult, and one wrong move could render the entire forum useless until the error was found and corrected.
There will be some users who are happy with the default features and won't see the need to install any extensions. There will be some who only need a handful of extensions to add a few nice features, and then there will be some who will install a multitude of extensions to give their forum members every "bell and whistle" that they can.
That's what makes this great - everyone gets what they want, for the most part, and PunBB still stays the lightweight alternative to the other bloated forum programs that Rickard wanted it to be.