Ranking Employees: Most People Are Slightly Worse Than Average, With A Few Superstars

A new system to evaluate the efficacy of staff at Yahoo has led to increased moroseness and frustration among employees. The employee evaluation system recently implemented by CEO Marissa Mayer has apparently resulted in the firings of more than 600 people in recent weeks.
Along this evaluation system, managers are asked to rank their employees on a bell curve. Low performers, thus those having gotten lower scores and therefore being ranked at the lower end of the curve, are to be dismissed.

Yahoo's Latest HR Disaster: Ranking Workers on a Curve

As the article points out, many people have lost faith in the efficacy of ranking employees since employee performance does not follow a bell curve.
Moreover, while exerting a little ("healthy") pressure on employees can result in higher levels of motivation among staff, "constantly pitting employees against one another is terrible for morale."
Especially for companies such as Yahoo, being highly dependent on innovation and the creativeness of its employees, this could have a detrimental impact. Being afraid of scoring low in regular evaluations, employees are more risk averse and thus less innovative.

What is your personal opinion on Yahoo's most recent HR policy?
How do you feel about employee rankings in general, and what effects do you suggest might a direct comparison and pitting of employee performance against each other have on staff motivation and working morale?