To Visigani and others arguing that the tiers are irrelevant due to the DM or player skill or gentlemen's agreements or the like, I direct you to JaronK's introductory remarks on the Tier system:
My general philosophy is that the only balance that really matters in D&D is the interclass balance between the various PCs in a group. If the group as a whole is very powerful and flexible, the DM can simply up the challenge level and complexity of the encounters. If it's weak and inflexible, the DM can lower the challenge level and complexity. Serious issues arise when the party is composed of some members which are extremely powerful and others which are extremely weak, leading to a situation where the DM has two choices: either make the game too easy for the strong members, or too hard for the weak members. Neither is desireable. Thus, this system is created for the following purposes:
1) To provide a ranking system so that DMs know roughly the power of the PCs in their group
2) To provide players with knowledge of where their group stands, power wise, so that they can better build characters that fit with their group.
3) To help DMs who plan to use house rules to balance games by showing them where the classes stand before applying said house rules (how many times have we seen DMs pumping up Sorcerers or weakening Monks?).
The Tier system is not saying that T1 classes are the best classes to play. The Tier system is not saying that the DM has to let T1 classes wreck the game. The Tier system, when it comes right down to it, is a measure of two things: how much DM intervention is needed to make the game work for certain classes, and how much power lies in PC hands when playing certain classes.
T3 classes are generally the most balanced classes, and can handle CR-appropriate encounters fine without much buffing or nerfing of either the PCs or the opposition. T3 PCs can influence the game world to a good extent but usually can't completely change the world or circumvent every challenge.
T1 classes are generally more powerful and versatile than everyone else, and can overpower CR-appropriate encounters to the point that the DM needs to either present them with above-CR encounters on a regular basis or optimize CR-appropriate encounters with good tactics to keep up. T1 PCs can influence the game world on a massive scale and can completely dominate everything from kingdoms to dungeon crawls if they aren't checked.
Here's what might come as a surprise to you if you view the Tier system as merely a masturbatory fantasy for nerds who were beat up by jocks in school: the Tier system says that the T5 classes are
just as bad as the T1 classes. They're weaker and less versatile than everyone else, and can't deal with CR-appropriate encounters unless the DM holds back or nerfs them and/or "plays dumb" tactically, the players are exceptionally skilled, or the players have lots of items/allies/other resources to compensate. T5 can't really influence the game world at all except through things like Diplomacy which are game-altering and -breaking regardless of tier or through pure roleplaying/DM fiat/
Plot Coupons.
The variation in tier isn't a development failure in and of itself; the development failure is WotC assuming that they could remove most of the caster restrictions and non-caster benefits from AD&D and retain the possibility of having casters and noncasters be on a roughly even playing field in the same party. T1 characters don't wreck the game inherently if the DM knows what he's doing; I've run games with 5-6 T1 casters in the party and it's worked out fine because I was able to provide them a challenge with intelligent T1 opponents. T5 characters don't fail at life inherently if the DM is willing to work with them a lot; I've run games with 5-6 T5 noncasters in the party and it's worked out fine because the players knew their classes' weaknesses and played to their strengths in a campaign and campaign setting built with an eye to T5 limitations
The problem comes in when you try to have T1 and T5 characters in the same party
and the DM doesn't compensate for this. You're saying "Well, the DM can always..." and the response is that yes, that's exactly what the Tier system is
for, to tell the DM that he'll need to adjust things up for T1s and adjust things down for T5 and put in significant effort to challenge a party of mixed tiers, unless the players are aware of the problems with that setup and can hold back/self-nerf/compensate the lower-tier PCs/otherwise equalize the PCs via gentlemen's agreements. Rather than being the ultimate expression of nerd superiority, in many games T1 casters (and sometimes their T2 brethren) are nerfed or banned altogether. Quite often, T5 (and sometimes T4) classes are
also banned because there exists no quick fix that will let them "play with the big kids," or they're buffed far past the extent of a quick fix, or the underlying system is changed to let them compete through a combination of caster nerfs and martial buffs.