I will be one to come out firmly in support of the ranking and testing system.
I think ranks are the best incentive I've seen to motivate people to work hard in their training. It would be nice to think that everyone would try their hardest at every class even without dangling a carrot in front of them, but I think most people, certainly myself included, are trying at least in part to gain the next rank, and that helps them to keep focused. I know I couldn't wait for the day when I would be one of those with hakama and black belt. You may call this egoism or boasting, but I call it a real incentive.
As for testing, I know I worked much harder and remained more focused in order to feel confident in the tests. For example, before my shodan test, I remember doing the same waza time after time every class for months. I could have practiced many different waza during that time, but learning to do certain ones at a higher level through very focused practice not only teaches you those techniques better, but raises your ability to do other techniques and to understand Aikido in general. Therefore the testing process can raise your ability and deepen your understanding better than a more unstructured practice schedule.
So I fully support ranks as an incentive (I know they have been an incentive for me), and testing as an effective means of good practice.