Why is my content not hidden?
Look at the documentation for hook_node_access, here:

https://api.drupal.org/api/drupal/modules%21node%21node.api.php/function/hook_node_access/7

The key is where it says: 

Also note that this function isn't called for node listings (e.g., RSS feeds, the default home page at path 'node', a recent content block, etc.) 

You probably want to check the link following that comment, i.e. the node access rights description, which got more complicated in D7 from D6.

Another thing to pay attention to is: if you're logged in as user id 1, then you won't be affected by those node access grants.