As far as I know all the IITs and the IIMs follow this jazzy system of continuous evaluation. However, this system too has its demerits. This system encourages selective study of the courses by the participants.
The methodology followed in the continuous evaluation system (CES) is that a few quizzes are conducted followed by a mid-term exam which effectively carry around 50% of the weightage of the course between them. What this does around the middle of the term is that it encourages participants to indulge in selective studying. As far as quizzes go, most of the time it is multiple choice questions which in spirit encourages intelligent guess work which works most of the time.
As far as the mid-terms go, this ensures that the participants actually enhance their knowledge of the course to a limited extent. However, if one is smart enough to guess the pattern of the paper, he/she can take a chance and study only those kinds of questions which will surely show up in the papers. Plus, post mid-term, most participants effectively forget what they learnt during the pre mid-term portion of the course.
And the course post mid-term also follows the exact same pattern. What this does is that it encourages participants to fight for grades (twice during the course) rather than internalizing the knowledge aspects of every course.
A better system of evaluation would be to conduct only end-terms which would ensure that participants are always on their toes throughout the term. This coupled with a few projects which encompass the critical aspects of the course would ensure that participants are completely aware of the course and obtain a reasonable level of knowledge of the course.
Even though the second system is probably being followed in some course, the number is awfully inadequate.
However, since the second system is unusually demanding on both the participants as well as the instructors, this results in a hell of a lot of heart burn from the participants’ end. They would feel short-changed if they have a bad day during the end-terms. But, in my opinion, it is a system like this which ensures that everybody takes away something from the entire course.