I'm not a Zerg player, but I've never seen Nydus worm used against me either. When do people actually use it?
Nydus worm can be very effective in many different use cases.
Combat: All you need for a nydus worm deployment is line of sight which you can easily achieve with an overlord/overseer. This can be an effective way to get through a walled in opponent without actually taking out their wall. Nydus worms also generate creep so you could even setup spine crawlers if you so wish.
Another way to use it in combat is to distract your opponent. Because the nydus worm can be heard anywhere, they usually go into panic mode and will send their army back to their base or will be otherwise distracted in scouting for it at which point you can attack with your army without actually using the worm.
Its also important to note that when a nydus worm node is destroyed the units inside are unharmed unlike a warp prism, medivac, overlord. Unless you take out the whole network.
This is a bit tricky and requires you to be on top of things micro wise. But you can use a nydus worm to mine out an undefended high yield without actually building a hatchery there.
Setup the nydus worm in your base right next to your hatchery and set the rally point to your hatchery then shift click back to the node. Then where you've opened the nydus worm at the high yield, set its rally point to the minerals then back to the worm.
Hot key your nydus worm's mineral node to a key and the base node to a key. Load it up with a bunch of drones then every 20 seconds (i forget the exact timing) select the opposing nydus node hotkey and press 'D'. this will unload your drones, and depending on which side they unloaded they will either start mining or they will return the goods back to your hatchery.
Obviously this use is very complex and requires you to remember to unload and at which node to unload at (have the drones just mined or just returned gathered minerals?). You also lose the added benefit of having more larva and another hatchery.
1v1 is risky at this point in time because of the time it takes to build and the noise it makes. It is also easily killed.
However, in team games, a nydus can be very effective which is where I personally will use it. It is an agreed upon strat with my teammates, usually someone's observer provides the line of sight. I've used it to get a quick mineral line attack when the opponents push out, and I've also used it to provide a smaller secondary attack to draw attention away from the main forces of my allies while they attack.
The main uses have been posted, but another use is simply as an intra-base tram system. On big maps, it can be very handy to shuttle armies around very quickly using the Nydus network. You can even use it to ship your attacking army up to the frontlines, and send in reinforcements quickly like how Protoss use Warp Gates.
Another use is expansion defense. If you are a good little Zerg and have lots of expansions, you can save resources on defenders by simply adding a Nydus worm exit or two to each expansion. Then you can keep a few dozen Hydralisks in the system, and pop them out if they are needed. It's not as good as static defenses since the units exit one at a time, but it can help protect isolated expansions.
It's a way to get across the front defenses of someone, or used as a surprise attack (like to hit the mineral line of the main base or something). It also gets units across the board very quickly.
One reason why you might not have it hit you very often, is maybe you properly defend your borders, so an overlord can't get in your base anywhere to drop the worm.
As Mark already said, Nydus worms can be used to get around the enemy frontline. A tactic i use sometimes as Zerg is to send an overlord into the back of his base (if possible a little out of sight) and spawn the nydus worm there. Then i send all units to attack his base. As soon as there is too much resistance i simply retreat into the nydus worm and spawn it somewhere else, i.e. at one of his expansions.
You can repeat this until the enemy is either dead or attacks your base out of desperation. Just remember to retreat before you lose too much and if the enemy can't muster enough defenses, just send more reinforcements through the nydus worm and finish his base off.
This works best with hydralisks as often the first resistance you encouter will be his air units, as they travel a straight line into his base while his ground units have to go around through the choke.
The advantage of nydus worms over overlord drops is:
- Nydus worms can't be shot down by air defense
- You can send reinforcements almost instantly
- You can retreat easily without having to worry about your overlords getting shot
Nydus + Overlord/Overseer dropping creep is a very effective combo for a common backdoor strategy. Most Zerg players will look for an exposed part of an enemy's base and then simply transport units to the enemy base. If used strategically, spawning the nydus and then removing the creep from the overlord will minimize visibility from the enemy (Zerg buildings don't generate much [if any] creep, thus this could be unnoticed from an amateur player.