Before you read this post, go read Shintar's excellent An Annotated History of the Badge System. As you read over the history, it becomes quite obvious that the current Valor Point system we have evolved over time, and now serves several different purposes than it used to.
So let's take a step back. What is the root problem that Blizzard is trying to solve?
In my view, the original design of PvE went something like this: First, a player would do quests mostly solo. After a while, she would transition into small 5-man group content. After that, she would move onto larger group content, or raiding. Each step up would be more difficult, and would reward better gear.
The problem, though, was that not everyone was able to transition from stage to stage. In particular, the transition from small group content to large group content was particularly harsh in Vanilla. Players effectively became "blocked" from moving up.
So then the problem becomes two linked--but subtly different--questions: What does a blocked player do with her time? and How does a blocked player improve her character?
That's the primary function of Valor Points. They allow a player who is in the second stage to still advance her character, by engaging in second stage activities.
Valor/Justice Points also have a secondary function. They mitigate the randomness of loot drops. Enough points guarantee you loot.1
Finally, Valor/Justice Points serve a third function. They give players a small reward even if the player doesn't need loot off a specific boss.
But is the current design of Valor Points the best way to accomplish these functions? Are some of these functions even necessary? When looking at randomness, consider that the amount of loot per player has greatly increased since Vanilla. Combine that with a more generic token system for tier pieces, and smoothing out of loot distribution is pretty much unnecessary in Cataclysm.
And the small reward is also unnecessary. Indeed, the current daily heroic cuts against this idea. Since only the end boss of a heroic gives VP, there is great incentive to skip other bosses, even though they give JP.
That really only leaves the first and greatest purpose of VP, giving a path of character advancement for non-raiders. I will look at that issue in a future post.
1. Unlike, say, Cho'gall and paladin bracers.