Would you believe that many teachers use 'effort' as an explicit factor in assigning grades?

They are officially required to (in Slovakia). But it is just one on many confusing, sometimes mutually contradicting, mostly applause-lights criteria.

(From my memory: The grades have to reflect knowledge, they have to reflect effort, they have to be motivating, and they have to respect human rights, whatever that means. And a dozen other conditions.)

As in, someone who understands the material without putting forth visible effort is assigned a lower grade than someone who visibly struggles to have the same level of understanding.

Yes, this is explicitly required by and explicitly forbidden by the rules. Welcome in the world of educational system!