The GCSEs came about as an amalgamation of the former seperate qualifications GCE and CSE. To retain the structure of having a more difficult exam (GCE) and a simpler one (CSE), GCSEs generally operate on two tiers. Foundation tier allows grades up to C, and Higher tier up to A*. The most popular examinations, for example GCSE Mathematics, also include an Intermediate Tier for grades up to B. Component-based exams, for example French or other modern languages, allow candidates to take a different tier in each component, and thus require a fairly complex points system to turn this into an overall mark.
The reason this system is considered preferable to the older one is that the tier taken should be transparent to a potential employer. Grade C gleaned from lower tier is the same grade C available in higher tier. As mentioned above, a CSE Grade 1 should have been seen as the same as a C in GCE, but few employers were willing to consider it as such.
There are various calls for reform of the GCSE system. A recent government report suggested moving the GCSEs forward two years to age fourteen, and allowing the brightest pupils to skip them altogether and progress to A levels. Whether such a radical change is possible remains to be seen.
As average grades increase every year, there are inevitably claims that the exams are being made easier. As someone who is currently slap bang in the middle of taking them, I must admit that this is probably true. However, the government plan is to bring them into line with the AS levels and thus provided a smooth progression of difficulty from GCSE through to A level. Also, it would seem to me that the old system was rather more dependent on the now-unfashionable skill of learning by rote, whereas today's exams are more interested in transferable skills and ability to think. That's not to devalue either age of GCSEs, but employers should be aware that employees with the same grades in the same subjects but from many years apart probably bear very different sets of skills.
In terms of raw learning, GCSEs are undeniably becoming easier. As an example from personal experience, the required list of Latin vocabulary had 300 words removed from the previous year. On the other hand, what purpose did memorising all those words ever serve? If the point of learning Latin is to improve our understand of English grammar, surely we need only a limited cross-section of actual Latin words? A balance needs to be struck somewhere, and while I fear in some areas the current system is too easy on students, any system needs time for fine-tuning. This year is the last in which candidates in French will be permitted a bilingual dictionary in their exam; their removal can only serve to make the exams more challenging.
It's hard to present a balanced argument on this, especially as someone currently taking their GCSEs. The new system promotes a different set of skills to the previous one, and as long as all parties involved realise this, there needn't be a great deal of conflict. Oolong points out that the main problem with the reduction of pure knowledge required at lower levels is the gulf that then forms when students move up into higher levels. This is indeed something that will need to be addressed in future revisions of the syllabus for each subject. Since the boards set the grade boundaries, they can hand out whatever grades they desire. It may be some time before the examining boards strike the correct balance, but we should at least appreciate that they face the enormous and largely thankless task of replacing an out-dated system with a new one.