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It works well, they click the e-mail link, and it saves a cookie to log them in. I think it's a decent solution. It comes down to preference, would you rather type in a password, or click a link e-mailed to you. At times, I have complex passwords, so they take a while to type, and other times, I'd rather type in a password, than access my e-mail on a computer or network of questionable security.
In the end, passwords need to change, and I think in the future they'll disappear. We need smart cards or something along those lines. Click the login button, pass the card over your phone or computer, and you're instantly logged in. The card remains in your wallet like any other.