From Mark Weeks,
Your Guide to Chess.
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Ratings allow for more competitive subdivisions of players. For example, the USCF class system is structured as shown in the diagram.

This class system permits tournaments and prizes restricted to players of similar ability. A Class E player, competing in a Class E event, has just as much chance of winning the event as the world's best players have of winning Linares.

No system is perfect, and the there are some problems with the rating system. Rating deflation is a natural phenomenon caused by young improving players entering the rating pool and old stable players leaving the pool. Rating manipulation happens when unscrupulous organizers submit fraudulent reports to a rating agency.

These problems are a small price to pay for the great benefits that Elo's rating system has provided to the chess world. His induction into the Chess Hall of Fame was an appropriate expression of his great contribution to chess.