What is the difference between this and http://codility.com/?
1. Viewing a playback of how the candidate coded the question.
Even a bad candidate might be able to 'prettify' his final code (or even craftily cut and paste code while solving the problem).
However, it is almost impossible to do so in a playback of the entire coding process.
It is like the difference in complexity between creating a fake photo vs creating a fake video !
2. Adaptive testing
Depending on the performance of the candidate, the questions presented will increase or decrease in difficulty - allowing the system to accurately assess the candidate's skill level (that is the advantage of using several small questions, as opposed to a few large questions).
3. The ability to embed the testing widget both on your website or even on a job posting on a job site - that way candidates never even have to leave your website.
However, number 2 and 3 are nice.
As you said, it is the final code which is more important. But don't you think that it is also important to view the process by which the programmer arrived at the final code ?
An experienced coder will quickly reach a solution. Although he might make several mistakes on the way, he can usually quickly detect and correct them.
Someone less experienced would take longer, make more mistakes and probably take several attempts to correct those mistakes before getting it right.
Even though the final code might be more or less the same, the playback would help you discern who has better coding skills.
Of course, this would mainly be of use when attempting to choose between two closely matched coders.
Regarding copying and pasting - at the moment the rules don't explicitly ban this. The problem with allowing it is that the likelihood that the coder might attempt to cheat (and get away with it) is vastly increased (and cutting and pasting makes the playback feature worthless !).
That is why we went to the trouble of enabling syntax highlighting, compilation and testing within the widget, so that it would be as close to an IDE as possible.
BTW - regarding testing - aside from the 2 default test cases, it is also possible to enter your own testdata in the widget.