Dazzle camo wasn't so much a "hide me" camo as it was a "hide data needed to shot me" camo. It was designed to make it harder to estimate heading and speed so it was harder to calculate accurate shots by submarines and naval guns which needed data about the target ship's speed, distance and heading to calculate an accurate shot.

This is true for modern infantry camo, as well - it aims to disrupt the human silhouette at a distance, not only to make it harder to spot, but also to make it harder to aim center mass (can be tricky if the visual border of said mass is all fuzzy and blends into the surroundings!).

The distinction I was making was that dazzle doesn't really hide things at all where uniform camo does try to hide the person somewhat.

Radar killed dazzle.

It's definitely the final nail in it's widespread use but it was used somewhat up to the end of WW2 though that focused on anti-kamikaze painting in the Pacific theater. Japan was several years behind the rest of the world on radar so it stuck around longer in the Pacific too before that transition to anti-kamikaze but even there by the end of the war Japan was using radar fire-control.

My guess would be that the thinking behind it was that in urban environments you have more straight vertical/horizontal lines (houses, roads etc.) and thus wavy camouflage patterns would stand out more from the background.