It's great. The 12000 people who are signing a petition to stop is are... misguided.
If a modder wants to continue working for free, they can, or they can use a pay-what-you-want system. If they want to charge a price, they can. There will surely be the same "race to the bottom" pricing as we've seen on the App store though, where content will start at decent prices but pretty soon most things will be at the minimum price (e.g. 99c).
In my game, we've been planning our own version of this for a while. My thinking was -- supporting a vibrant modding community is very important to us, I don't want to restrict them in any way... but, I also want to sell my own DLC. How can I justify my own DLC when modders will be doing equally good work for free? There's no simple answer to that, so the answer is to disrupt the question: If you can't beat them, compete in a different market! Giving modders the power to call their own work DLC means that now I'm competing with them on an even playing field -- I can charge a fair price for my DLC, and modders that are producing mods of equal quality to my DLC can charge a fair price for their own work as well.
It's win-win.
Except for the small percentage of entitled whingers in the steam community, who feel that they as consumers have the right to dictate that modders shouldn't be allowed to choose whether they'd like to be compensated for their work.
I learned C++ coding, 3D modelling, texturing, animation, special effects, AI, etc, etc in the insanely popular Half-Life 1 modding community. There's been nothing really like it since IMHO -- it was the scene that gave us Team Fortress classic, Counter Strike, Day of Defeat, Insurgency, Natural Selection, The Ship, etc... These days the people who used to make these kinds of mods just pick up Unity or Unreal Engine instead, and make "indie games". It would be nice for these kinds of communities to re-emerge as a viable alternative to making a fully fledged indie game.
There will surely be controversy though. Cloned mods. Stolen content. Bad team break-ups and grey-area copyright concerns. People charging money and promising that every feature in the world will be added in the next update, only for them to never be heard from again...