A senior manager once confided to me that he does not have a shortage of good engineers to tackle even the most complex engineering problems, but he has acute shortage of people who are able to coordinate work of those good engineers. I have then concluded the review system makes sense in the light of this revelation. Hiring and Performance Review policies, however bad they seem, successfully maintain a pool of talented engineers; it's a solved problem. The problem that is not solved is making sure those engineers make coordinated effort towards a worthy goal. It is Microsoft's core belief that such coordination does not emerge naturally and so it must come from a leader or a group of "leaders", and the goal of the review system is to identify and promote such leaders, even if they have to sacrifice some of the good engineers in the process (finding more is a solved problem). The way the find more "leaders" is measure people on "scope of influence", with idea being that top engineer and manager talents will be able to influence more people compared to their peers. A sad byproduct of this approach is that a lot of people expand their visibility just for the sake of expanding their visibility. This produces a lot of sideffects, to the point where they sometimes become major output of the system rather than mere byproducts.
So if you wanted to know why the system works the way it does, above is a possible explanation that makes some sense.