A question that frequently comes up about rank testing is the standards of passing; more simply put, what determines who passes and who fails? To further answer this, there's two main schools of thought.
Basically, there's skill-based ranking (as in understanding of techniques taught) and there's performance-based ranking. My belief is that there should be a certain level of the understanding of particular techniques at all levels, whether it be the katas learned or different types of techniques (such as different types of kicks for example), while performance ability should have nothing to do with ranking. In today's age, all types of people are into martial arts, from the athletically gifted to the athletically inept. Should a 3rd degree black belt demonstrate better understanding in basic techniques than a purple belt? Of course, but to say that their performance level should be better is total hogwash. If performance ability were the indication of ranking, then just about everyone would be demoted once they hit their 40's as their bodies naturally slow down due to advancing age. If it's performance ability that needs to be tested, that's the purpose of tournaments.