I don't think the whole practice stinks at all. As a restaurant owner I like the tipping process because I feel the customer gets better service when the server knows the customer is the one determining how much they will make today. I think it is incentive based. Those who give great service makes more than those who give average service. And those who give poor service don't make enough to pay their bills and end up finding other work.
Tipping has no financial implications to me whatsoever. If tipping were not a standard custom in this country and the servers were paid a higher salary it would be reflected in the price of the dinner. Instead of paying $9.95 for a shrimp dinner plus expected tip the customer would be paying $11.95 with no tip.