I'm seeing two different definitions of the term 'tiers' coming up:
1. Tier: A measure of the most consistently high ranking characters in tournaments.
2. Tier: A list of characters based on winning potential.
Although both definitions are related to some degree, as many people enter tournaments with the sole intention of winning and thus will chose the characters at the top of definition two's list, they still have different meanings.
1. (Most) People go to tournaments to win. To help reach that goal, players will select the character that they believe, from experiences and accounts, will help them reach that goal. From there, they develop that character as much as they can leading to more experiences and discoveries. If the character consistently wins battles for him than that character will be considered to be a 'higher tier' character. If he loses consistently with that character, the character will most likely be dropped, replaced with a different character and considered to be a 'low tier' character. Thus, do the tournament winners become the 'high tier' characters. Everybody begins on equal footing but the winners are the ones that stay. Why does this have to come from tournaments? Nobody else plays to win as much as the tourney guys do.
As some people have mentioned there is a possibility that tiers based on tournaments are little more than just glorified popularity contests. There is a bit of truth in that. However, their popularity comes more from their ability to win than from which game they're in or what they look like. I didn't use to believe that since Melee's/Marvel vs. Capcom's higher tiers are most of the 'cool' characters, but I came to realize that it really is their wins that determine it based on Smash 64's tiers (and videos to prove them to me). If popularity was the determining factor than Kirby would still be top tier in Melee - something which I doubt that anyone would claim.
2. I, however, prefer definition number two: a list of the character's potential - how each character fares when played at his/her absolute, very best. It's important to remember that the learning curve is not part of it - it's a joke comparing how long it takes to be great with Shiek compared to Fox - tiers consider characters at their peak, their 'metagame'. Bowser, at his absolute, very best will almost always lose to a Shiek played to her best. That's what determines the tiers. Who's better/worse overall, regardless of tournament results. However, as already discussed, tournaments adopt better characters rather quickly (and they raise them to be so as well).
The tricky part with tiers (this definition) is proving them. If you want to prove that Roy is a better character than Marth, go out there and use Roy to kick some ***! What's that you say? You got ***** by all of those higher tier guys? Well then, I guess he's not that good afterall, no? (based on a true story, sadly) Tournaments are largely where players can 'prove' their character's superiority and thus did definition one misguidedly come out (although, again, they're both pretty related). I suspect that Brawl's online mode will make tiers come out much faster as the increased competition will lead to the realization of each character's metagame faster.
What may also complicate things is how different some of the characters can be to each other. What if a triangle of sorts appears? If character X is better against Y, Y is better against Z and Z beats X? Their tier level is determined by how they fare against everybody else, not just certain characters. Let's say that Mewtwo is the ultimate anti-Fox (err, use your imagination) yet loses everybody else whereas Fox wins against everybody else. The result? Fox is higher tier than Mewtwo. Counter characters can be complicated but the tier list is a list of 'who is better' OVERALL.
Since there is no official notice of when a character is as good as he/she/it/Kirby can be, tiers aren't fixed. Has anybody tried holding Left on the + pad while doing Mewtwo's Forward Smash? What if it turned out that doing so turned that Smash attack into a one-hit-ko? That would bring Mewtwo up the tier list considerably as he'd then be 'better'. With Melee seemingly understood 100% I doubt that its tier list will change much from here on, although I do believe that some of the lower tiers may not have really reached their metagame (I play as Mewtwo and I swear he can be... well, not THE worst).
One final note, I don't mean to sound rude to the more 'elite' guys at Smash Forums but they're not the ones who determine what tiers mean or what they are. Not exactly. Not the way some people on these boards talk. Tiers, and the word 'tiers' have been around since Street Fighter 2. They're very much something that's determined by the community as a whole, backed by evidence supporting each position. I hate reading that something is so because the 'backroom' guys said it is. Brawl will probably change that.
