This apple article explains it.

But it no longer hides all open windows for me under 10.7.4. What could be causing this?

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    I'm not sure that you understand the command. Command-Option-Click on an app icon hides all open windows from apps other than the one you click on. For the record, I have just tested that this still works. – Nathan Walker Jul 20 '12 at 22:58

Command-option-click does not hide all open windows. As stated in the linked Apple article, this command hides all other open items leaving the clicked item visible. It is possible to hide all other items and minimize your most recently item with command+option+h+m. This is a combination of command+option+h - Hide Others and command+option+m - Minimize.

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