This is one of those concepts that sound right the moment you hear it. It puts a name to a phenomenon that we are barely aware of until it is named. But like the solution to a Lateral Thinking problem, the moment we have it, it seems incredible that we did not always have it.
"One of the most systematic errors in human perception is what psychologists call hindsight bias -- the feeling, after an event happens, that we knew all along it was going to happen. Across a wide spectrum of issues, from politics to the vagaries of the stock market, experiments show that once people know something, they readily believe they knew it all along."
In the Washington Post article quoted above and this one from TCS Daily, the writers apply it to, among other things, the Iraq War. In my reading recently, I've come across some rather older instances. In writings on the foundation of Rome by Livy, Plutarch and Dionysius of Halicarnassus, the first kings, Romulus and Numa Pompilius, are credited with the creation of a bewidering number of cults, institutions and customs. In each case, the founder acts with 100% prescience; his intentions in creating the institution match exactly the eventual function of that institution as it is seen 700 years later.
For example, the Sabines and Latins aren't getting on so Numa assigns them each a trade guild in order to confuse their loyalties and make them cross tribal boundaries. Undoubtedly, guilds would have had this effect, but whether Numa intended it (or even founded them in the first place) is open to question.
Hindsight bias also helps to explain why it is so extraordinarily difficult to understand the real options available to a decision maker at the time of the decision. Knowing what happens afterwards makes so many lines clear that had been fuzzy, even indistinguishable, when the moment came to say Yay or Nay.