Everybody begins with a clean slate---zero points. Over time, you will have the opportunity to earn points through tests, quizzes, explaining questions at the board, doing extra-credit work, and so forth. There will be no shortage of points, and anyone who wants to do more work will have the opportunity. When the semester ends, we will close the books, tally the points, and assign the grades. Any questions?
The baffled looks are not unexpected. Neither are the ensuing questions.
Some people will drop the class right away. Some will wait for the final day to drop. Some will panic and some will complain to the department chair. Some will stick it out.
In the end though, however unorthodox, the method is sound. Statistically, the same number of people will drop such a class as any other. The grade distribution will be the same in the end as the intelligent and the motivated will statistically separate from the slackers and those who cannot grasp the material. The cumulative points for a class will form the usual bell curve that becomes more obvious over time as more points become available. In the end, it becomes trivial for the instructor to assign the grades.
During the course of the class, no student knows exactly where he stands. The teacher may reveal where each student stands relative to the others, but at no point before the final exam is one's position final. A lead student who rests on his laurels can easily fall behind a mediocre student who is absolutely committed to working practice problems day and night to accumulate points.
In this case, the instructor constructs a game (in the sense of mathematical game theory) that exploits human nature---and that indeed can be useful in "awakening" a student. However, a student who is already confident in his place and abilities---a student who is already "awake"---cannot be affected by such a game; moreover, such a game is not necessary for such a student---whatever the final grade.
How do you perform when you are off-balanced? Lacking information? Working in a vacuum? Are you always worried about how you are viewed by others, or how you rate in comparison to others? Do you find yourself often looking for validation?
If you realize that your Path is your own, that your place on the Path is simply where you are, and if you do your best to progress, can anyone you encounter along that Path unbalance you?