Here is some footage police recovered from an actual pinhole camera that thieves installed at an ATM in the UK. You can clearly see that covering up the keypad when entering your PIN is an effective way to thwart thieves from getting your PIN.
While they might still skim your card number, and be able to attempt to charge your card using credit mode, it will keep them from using your debit card/PIN combination. This is important because some banks, especially Chase, have proven to be much less forgiving when it come to protecting you against debit card fraud when your PIN number is used. If your card is used along with the PIN number, Chase may claim that you made the charge personally.