Well, better it depends. SEO is always something that should be determined according to a particular project.
What is the best for one is not necessarily the best for others.
And, this is only the first mod rewrite released for phpBB3, won't be the only one, as per phpBB2, there will be several solutions using different url standards in the future.
About why did we add virtual folders in this first one, the reason is first that phpBB3, as you must have noticed, now always uses the forum id in the topic urls : viewtopic.php?f=xx&t=yy
This is what makes the folder injection trick interesting, first because it's doable without rewriting SQL queries and then because this way, we simulate topic urls with only one parameter, since the forum title and id becomes part of a folder name.
The common alternative would be topic-title-fxx-tyy.html (thus topic-title-fxx-tyy-zz.html when paginating), and this is not like the best url standard one could dream of either.
We can as well define a standard only using the topic id in topic urls, like before, since phpBB3 code is able to handle these, but this would mean a little more SQL load, not much since it would not add a query in most cases, only performing a bit more complex one, but still.
The mod currently released is the more complex one, the one on which we will build all the others.
Talking about virtual folders, it can as well help out to categorize content, since all topics would appear in a relevant folder. Can in the end be better than having all the topic at the same level when they can covers really different subjects.
The mixed mod will be really interesting I think, when we would only inject the forum titles in url and thus add chosen keywords in all the topic urls :
What is for sure is that there will be more than three different URL standard provided for phpBB3 here. Feel free to suggest and expect releases