It only prevents damage from a fall up to about 600.  After that you take the full damage just like it wasn't there.  Very rarely will you be unable to handle the damage from such a short fall. 

I was in Gnomeregan with a level 32 rogue trying to get the toxic revenger from the Viscous Fallout.  We would both run in and fall straight down to the bottom and take the same amount of damage (600-800 depending on where we landed).  It doesn't do enough at level 40 to warrant spending the 2g.  Later on, sure.  2g is nothing then.