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Psychohistorian comments on Rebasing Ethics - Less Wrong
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Tipping, for all the grief it gives old-school economists, is actually a really efficient system if social norms are strong enough to maintain it.
I always tip ~15% for competent service. There have been a few occasions where I've simply refused to tip because I found something egregiously offensive about the service (usually related to quietly billing me for something without telling me it was extra).
I got comparably bad service as many times In two weeks of traveling in continental Europe, as I have in twenty years living in the States. A lot of waiters in Europe were incredibly slow, disrespectful, or otherwise below normal competence, which made perfect sense since there wasn't a thing you could do about it.
I've never seen American waiters, but European waiters seem just fine to me. I never remember any spectacularly bad or spectacularly good service - it's normally professional and competent - I'm not even sure what outstanding service would look like.
Really outstanding service would be where the waiter always shows up when you wish they would to refill (or replace) your drink or other bottomless item (chips and salsa are commonly unlimited in tex-mex places), remove dishes you no longer need, and generally is available to be flagged for whatever else you need without hovering.
Bad service can be where you're ignored for almost the whole meal, or where they hover constantly and require reassurance every minute or so that you don't need anything else, or act angry or as though they have some place else they'd rather be, or they mess up your order, or spill something or assist you in spilling something...
Bad service is enough to ruin a meal; really great service is almost invisible -- things just happen when you would want them to, just before you'd think of it. :)
It takes a special kind of person to have the attention to detail, social skills, and intelligence to provide outstanding service as a waiter, and few people with those skills stay in that kind of job long, so outstanding service is very rare. Possibly this is less true at more expensive restaurants.