Not everybody I've dealt with likes the idea (on the employer side I mean - had very few interviewees dislike it ;-) - but I've found it effective. For few reasons:
* If you actually look at the total cost of hiring, adding in paying folk isn't actually that much more money.
* Interviewees fucking love you for it. There's a real "You're taking me seriously, so I'm taking you seriously" moment.
* It shouldn't really make a difference to the employer side (because most of the costs are for your time - not the interviewees) but it gives you some real clarity on whether it's worth interviewing some candidates. It encourages you to make smarter decisions earlier in the interviewing process.
* You seem to get less hassle from folk you reject. I assume because the payment makes people see the process as taking them seriously.