Time for my two cents I guess. Here's an analogy to help explain tier; bear with it if it sounds ridiculous.
Imagine you're going to have a fight with another guy and you have a choice between using a knife or a gun. Assuming you're not crazy, you want the gun because it gives you a better chance of winning. And if you have a gun, your opponent's going to choose a gun too because a knife has many obvious disadvantages against a gun. But what if you're better at using a knife than a gun, or you just like knife fighting better? You can convince your opponent on a ban on guns for the fight.
Now apply that to Pokemon. It's foolish to think all pokemon are created equal, and given the choice between a Febass and a Mewtwo it's pretty clear which one you would pick. There are definitely certain pokemon that can only be reliably countered by a few specific pokemon (as opposed to a certain type) because of their speed, defenses, or raw offensive power. So these pokemon are banned (Ubers is not a tier, it's a banlist). This is done by a community vote, not arbitrarily, and after much testing. And since rational players are expected to use good pokemon, they look to the usage of every pokemon in standard play (also called OU) and divide them accordingly. Tiering pokemon is very subjective and hard to measure; Volcarona might not be very powerful against Heatran but Ferrothorn begs to differ. Each tier also serves as a banlist to the lower ones (i.e. OU has Ubers banned, UU has Ubers, OU, and BL banned).
One of my personal favorite pokemon is Whiscash. While I like its design and such it has pretty average stats, so it's rarely used in competitive play, especially because Gastrodon, Swampert, and Quagsire for the most part are more effective Water/Ground mons, so it goes in the lowest tier. Thankfully, I can play in NU and use Whiscash without having to worry about hard hitters like Chlorophyll Grass types, Dragons, etc. Also, I can try to use it in OU as well if I really wanted to; it's risky, but with some good teambuilding and playing smart it might just work.
Smogon specifically (there's more than one competitive battling community) tries to make bans as simple as possible, especially for programming reasons with simulators. This is why all Excadrill and Blaziken are banned and Vulpix is BorderLine (banned from UU because of Drought).
To those asking about Drizzle+Swift Swim banned: It's hard enough to deal with in Ubers. First of all, about the only thing that outspeeds a SSer is another SSer, so they're hard to revenge-kill. Few things can absorb their attacks, since Rain offers double STAB boosts. Most of them are also not weak to priority attacks.