Re: significance to testing/belt rank?
Some more comments about rank awarding, since some things in this thread seems like very wrong to me:
1. In all the Dojos I know of Ranks do correlate to skill level
Simply, one is only awarded a higher Rank if he shows his own skill level has increased. Thus, there is a clear correlation between rising ranks and improving, but the ranks are not necessarily comparable.
Honorary ranks are an exception to the rule and some ranks (9th Dan -- So-Shihan in my system for example) are honorary by nature. It is perceivable that some organizations will decide all ranks above a certain level will be at least partially honorary.
2. Respect to people who attained their ranks not due to skill
I think there is a lot of sense in respecting a [b]person[\B] who has attained a new rank due to his [b]efforts to improve[\B], much more then respecting a new practitioner who is a better performer but has not worked for it. We respect the personal effort, more than the skill. The same goes for personal dedication, training time and several similar aspects which are under the control of the person in question.
If a person was given Honorary rank, it is most likely since the giver believes he should be respected. Thus, if you respect the giver, you should also respect the recipient. If you do not respect the giver, you can not learn from him, so go someplace else and leave him be (there is no point in trying to educate others who chose a different way to act based on your understandings).
3. Anything can be corrupted
Obviously, this includes rank awarding which can be turned into a profit making scheme.
However, I have rarely heard of "politics" regarding low Dan ranks (1-3 or 4). It is true I do not belong in some large organization, but the large organizations actually have more people at those ranks and should even care less.
4. Ranks awarded without an official test
Typically, those dojo in which ranks are awarded without testing, are places in which the teacher is very senior, veteran and knowledgeable, and yet, he can view his students in a personal manner, thus, he can test them over longer duration of time. Without a test at some pre-scheduled time, that teacher does not have any pressures and can award the ranks when he feels the person is ready.