When I first got to Prodigal U, I was a bit surprised by the number of formal reviews our grad students undergo. At PhD U, we had a 2nd year oral exam (not on research, with a few profs assigned to a whole cohort by sub-specialty), a General Exam (on research with the student's committee), and our defense. Since a PhD take 5-6 years, this is one review every 2 years or so, and is not too uncommon a pattern in my field. Here at ProdigalU, our students have a presentation based review every year, and I find I like this system very much.
For the student, it means a closer relationship with the professors on the review committee (which is the set up on a student by student basis) who see them every year. On the committees I have sat on, we are able to provide specific project related feedback, which can be a huge help to them. It also means more oversight, in case an adviser (through ignorance or maliciousness) is not acting in a student's best interests in terms of their research and training. The process also insures that students get to give high stakes presentations of their research at least once a year, which is much more practice at giving talks than I had as a newbie grad student.
For the professors, it is really nice to see the annual progress made by various students in the department. I was amazed this year to see just how much difference a year has made in scientific maturity for some of the students I am reviewing. It is also a way to keep up with what is going on in my colleagues labs, and perhaps spark collaborations. In addition, advisers can get some feedback or advice from peers on how to handle situations with their trainees from people who are familiar with their work. Though I haven't used this yet, I can see that it is a great potential resource. The major downside is that a proper review takes an hour, and we all have to review our own students, plus other students in the department so it can eat up a lot of time.
I admit I was a bit dubious when I first heard of this system, but I have been won over by seeing how annual reviews work in practice. I think it is much better for our grad students than the system I experienced, even though it is a time sink for me at a point in my career where I am already overscheduled.