What is Dmoz
That part is true is the vast bulk of the people that built it. The public perception that the only sites that get in are owned by editors or their clients or friends is not true now and never was. I know a lot of the guys that built it, and as in any volunteer operation the bulk of the work is done by a tiny handful of people.
The crew that did most of the adds are obsessive compulsive to the max and have literally added in many cases hundreds of thousands of sites. I know them by name, I know their professions, and the hardcore site add guys arent SEOs, they're everything from teachers to medical professionals that literally donate countless hours categorizing, adding, arguing over the correct hierarchy, etc.
Those guys are no different than fanatic butterfly collectors, and they at least once took pride in the numbers... it was a competitive thing. The guys that built the directory did not do it on the sites of friends / clients / family. Those got added, but so did millions of sites that were added becuase they fit in a category.
Bear in mind that one of the things that glued those people together was the internal forum... a place for like-minded hobbyists to share. That function has largely been co-opted by the rise of social media, and if they dont have the compulsion to login to their forum it tends to decrease the likelihood of the time spent editing frankly just to impress each other.
The kind the public generally *thinks* edit there are there too, but are weeded out when caught. A large part of the issue there is that they cant handle a directory with 5-6 million sites with a mere handful of people... and because they're so often accused of self-interest they tend to suspiciously reject applications from damned near everyone for fear that they are one of *those*. That entrenched us-vs-them mentality guarantees it'll stay undermanned, so sadly, the reason many people think they are corrupt is because of their efforts to avoid people thinking they are corrupt. It's a catch-22.
The volunteer editor / free adds model should have been scrapped before 2005. That's roughly the time the directory hit 5 million sites. It's fluctuated between 5 - 6 million since then and linkrot caused by age almost exactly offsets adds being done, and some areas are largely dormant, dated, and untended due to lack of manpower and/or daunting amounts of spam submissions. It's just too large to do with the skeleton crew that does the real work, and since they're volunteers they cant be required to edit in a specific spot or a specific amount. The model just doesn't work.
The result of keeping the model long past its expiration date has been the degradation of the database as being a truly meaningful collection. IMO, that's another reason Google cut even the appearance of a tie. The value placed on a link there by SEs isnt entirely misplaced, but because of the issues going unaddressed... it will continue to decrease in import even as a reasonably good reason for an SE to think a site listed there has value.
What is Dmoz
At one time it was the most important directory on the web.
It's nice to get into dmoz because of the exposure to other directories but it's nothing to lose sleep over.
I do still think link directories are a good thing, they do help sites get indexed no matter what anyone says
It's harder and harder to find quality high ranking directories though
I used to think DMOZ was a premium directory where only quality websites can be listed. But then I met a few moderators at DMOZ who actually ask for money in order to list your website.
I don't think it has any effect on SEO anyway. It used to be a prestige thing ("My site has authority -- it's listed in DMOZ"), but that's not the case anymore.
DMOZ directory listing still appear in the Google search results. So, you may get a little traffic.
However, may of the categories have no editors or the categories are full. Thus, the acceptance rate is very low.
You can actually buy domains that a listed in the DMOZ at low prices. This shows me that the listing isn't worth much.
I just submitted two very good sites to DMOZ as a test to see how long it takes to get them listed. One is an e-commerce site and the other is a travel agency site. Both are good quality sites that are 5+ years old and should not be rejected for any reason. Neither were submitted in the past.
I did not have very many problems getting a site listed ten or twelve years ago, but have not seen any sites approved in the last five or six years. Let's see if these get in and if that makes any difference in the SERPs. I have serious doubts about both.
Here is a new article about DMOZ, along with a new Matt Cutts video on this topic.
What Role Do DMOZ Listings Play in Determining Google Ranking