Sometimes moderators overstep or apply rules unequally. It is essentially a random group of people deciding what the site's values mean to them, with the power to enact their will.
But it does seem to work. Stack Overflow, Wikipedia, and Reddit have found massive success in large part to the work of the volunteer moderation. I have no doubt each of the communities would be significantly worse off without the collective thousands of hours of thankless moderation work done by volunteers.