This method can definitely take its fair share of fish. I sometimes use this method in rivers where the fly is under an indicator, I generally use a very large corky or poly yarn indicator. However in lakes it is common practice to use a very bouyant fly as the indicator and then run a second fly that sinks underneath the dry fly, hence giving you a nymphing setup. To make this method effective, it is very important to coat your dry fly with floatant that way it does not suspend beneath the water. Hope this sheds some light on the subject and don't forget about the fly fishing section; many more experienced fly anglers there than I.
Drew