It has evolved considerably since it was first implemented nearly a decade ago.
Before the ratings system was implemented (before 2004) there was a much worse signal-to-noise ratio. There were many spammers, it was difficult to identify the trolls or the good guys.
With the first ratings system was implemented there were many complaints about it, but there was a very positive transformation on the board. The quality of posts dramatically improved, the relative volume of bad, wrong, and inflammatory posts decreased, and the site became better.
From the time it was first implemented in 2004 up until the system transition at the end of 2010, the system was basically consistent. The system was tweaked and tuned over the years, but basically stayed the same. Even though people started at 1000 points they could still take years to reach a 1500 or 2000 score. Points assigned were based on the score of the person voting you; if a high-rated person voted it would give several points, if a low-rated person gave a voted it would give very few (possibly even zero) points.
While it generally worked, if you wrote one post complaining about your rating your rating could plummet by hundreds of points in a matter of minutes. There was even some comics about it. [1] [2]
Most people made positive contributions to the site. Most people would give positive votes. Some people still trolled, some people still gave negative votes aggressively. Some people still went on sprees where they downvoted every old post from particular users. The system usually worked okay and admins only needed to step in occasionally.
When the site moved over to the latest format back at the beginning of 2011, the reputation system became much more generous with points. It became very easy to get points. Log in and get a point. If someone likes your post you get 3 points. Vote up someone's comment and get a point. If someone watches your thread you were given 5 points. It is very easy for one useful or informative post to give you 50 or even 100 points in a very short time.
That very small one-point decrease is extremely effective at preventing downvote sprees. Generally the people who abuse the system are also people who are concerned about their own ratings; those who went on abusive down vote sprees saw their own points drop and ceased the abuse. Those who rate frequently tend to vote up much more than they vote down and thereby realize the downvote isn't harmful to their reputation. I know I have about a 10:1 ratio, so if I lose one but gain ten I still come out ahead.
It works very well at its intended purpose of encouraging people to play nicely, and it is fairly robust against abuse.