I guess thats one of those local idiosyncrasies
Unless you've ever independently (non-circularly) corroborated your 'idea of how smart someone is', my guess is that it just serves as a proxy for qualities like academic education (which != intelligence), social class, similarity to yourself, &c.
For the record, hiring is hard, no company seems to have got it right. Think IQ tests probably says more than someone being forced to nervously scribble down bubble sort on blackboard or estimating how many water melons there are in pakistan. None of these obviously says anything compared to working with someone for a week.
edit: People are different, if it was as simple as evaluating a conversation it wouldn't be a very hard problem.