Here it is, according to wikipedia:

The Peter Principle states that "in a hierarchy every employee tends to rise to his level of incompetence", meaning that employees tend to be promoted until they reach a position at which they cannot work competently. It was formulated by Dr. Laurence J. Peter and Raymond Hull in their 1969 book The Peter Principle, a humorous ^[1] treatise which also introduced the "salutary science of hierarchiology."

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And apparently they found an even earlier version:

The same experience was described as early as 1767 by Gotthold Ephraim Lessing in his comedy Minna von Barnhelm ... Translated from German to English: “To become more than a sergeant? I don't consider it. I am a good sergeant; I might easily make a bad captain, and certainly a worse general. People have had this experience.”

Funny that it's considered comical. It's only comical when you aren't the direct report of a Peter.

When you are the employee of a corporation, you (inevitably) will find yourself reporting to a Peter. An annoying, completely self-unaware, nauseatingly flaccid, thoroughly angry, defensive monument to passive aggressiveness. This person will be the perfect 'don't let this happen to you' posterchild for an imaginary campaign promoting therapy. And, if you're actually any good at your job, they will make your life hell.

It kinda makes sense actually. Want to know how they got to the position they have now? The one that they are drowning in, the one that makes them feel incompetent and out of control, the one that causes them to dig back to their own five-year-old selves for the appropriate responses to unexpected situations? I'll tell you. They were good at your job. The one you have right now, and are probably excelling at. They are noticing in you exactly the same traits that got them this new overwhelming job.

So there you are having your performance review and wondering "why is this person so completely insane? Why are they acting this way towards me? Am I actually really not very good at all? What did I DO?" And the Peter is sitting there feeling like this is an important time to be the manager he or she was hired to be. To manage. To manage you. So they're going to puff up, get the lighting right, and go for it.

Before you freak out and start questioning yourself, think for a minute about Peter's own performance review. Unless he or she is a Golden Peter (a topic for another day...this is my new name for the person who is so clearly a Peter, and everyone can see it...except, of course, the people who sit above said Peter), he or she just got (or is about to get) a pretty bad performance review him or herself.

Because they're not good at their jobs.

Because they were good at your job and got promoted to the level of their own incompetence.

See how that works?

The nice thing about Peters is that they are completely predictable, in the following ways:

• You will be fine at first, and excited to 'work for someone who seems so interested in helping you with your career, and protecting you from the craziness above' etc etc. Why? Because Peter feels fondly towards you and determined to be an awesome manager.
• You will continue to be fine until you not only notice, but actually point out, some inconsistencies or nonsensicalnesses of the Peter.
• You will eventually do something fairly good, work-wise. Interesting things will start to happen.
• Peter may subtly take credit for your work itself, or for your ability to do said work due to his or her marvelous management skills.
• Peter will make sure that you 'include me in meetings' with the higher up or peer, and talk about the strength of his or her own relationship, and reputation, with said people.
• Peter will have meetings with you in which he or she manages to compliment your work, criticize your manner of interacting with peers or superiors, intimate that great things are ahead of you and that he or she will help you get these great things, compliment their own management skills, suggest that you have a lot to learn, and suddenly get sickly sweet at the end of the meeting, leaving you with the vague feeling that you've just been poisoned with perfume.
• You may be the kind of person to push back and show some personal power. In this case, Peter will start to kiss your butt a bit and ask you if everything is ok. At which point the entire cycle will start again.
• You may be the kind of person to back off a bit. In this case, Peter will stay on the attack. Annnnd...repeat.
• And finally, the most predictable part: your life will never be fun again until you, or the Peter, change jobs. 

And why don't the higher ups do something about the Peter?

Because all too often, the Peter is beyond annoying in various ways:

• Peter needs too much handholding from Peter's boss, who may or may not be a Peter him or herself.
• Peter whines a lot.
• Peter blames things on his or her subordinates.
• Peter is generally not a fun person to have any kind of conversation with, especially any conversation related to his or her performance.
• But at the same time, there's nothing easy to point at regarding Peter's performance--so it's not easy to get rid of them. And if you tell the Peter that they aren't doing well, then you are just asking for more meetings with Peter. Which would suck.

So, instead of dealing with Peter, Peter's boss (your grandboss) will be a bit of a pussy. Which means he or she won't be much fun to work with either.

Delightful.

Want to do a quick self-check on whether or not you, yourself, might be a Peter?

If you have people who report to you, it's super duper easy. Just ask yourself one question and be really truly honest with yourself:

Am I kinda threatened by any of my people?

The trick here is to be really really honest. You don't have to say it out loud, so why not. But if you are feeling like any of your people are really great, and you feel a twinge of 'wow, he or she is really great at this...better than me in some ways,' you better do some more thinking and self-monitoring. Because there are two ways this can go.

1. You turn into a Peter
2. You remind yourself that everybody is good in different ways, that you did good enough (we hope) to get the job you have now and, perhaps most importantly, if you handle this right, you'll come out looking amazing. If you support this talent, and act like an umbrella (to keep the shitstorms off the team), and are happy and supportive and even step up to be the person to help build this person's visibility in your company, you'll become known as a great manager. The talented person will think of you fondly -- probably as the best manager ever, given how many future Peters are in his or her path -- and will act accordingly. You'll also keep your rep as good in your old job. It's kinda magical.

I guess the whole Peter principle is kinda comical, if you look at it the right way. The right way to look at it? That would be from your home office where you do your consulting from.

Simple answer: because it’s been a couple months (at least) since they were designed. 

Here’s what happens:

Awesome IA/UX/Design people collaborate in some combination to create a really nice home page template (or several templates). They get them approved. Marketing likes them and totally understands what creative assets they’ll get to create and use in the templates. Awesome IA/UX/Design people create equally awesome style guide, which looks very swanky and well organized. It is designed to look gorgeous when it’s printed out on portrait-oriented paper, preferably not of a standard size. It has the templates all marked up with annotations (in just the perfect color) detailing hex values and font sizes and leading and color palettes. It’s glorious. 

The home page looks great for a few months or so. The marketing team (or whoever is responsible for the creative assets on the home page) is sticking to the style guide—often because they were heavily (and rightly) involved in its creation.

And then…something happens.

If it's an ecommerce site, it could be a sale (and actually it often is). It could be a natural disaster that the company is helping out with. It could be some other project that takes up all the usual designer’s time and therefore requires that the creative be temporarily outsourced. Whatever it is, it’s treated as an exception, and it’s designed as an exception. And that one little exception changes everything.

Suddenly the whole visual vocabulary gets tilted just enough to murder that gorgeous style guide. Concrete blocks are tied to its tabloid feet and it’s never even seen again (until the next redesign, when someone asks to see it, and is surprised how great it is, given the current horrifyingness of the site).

It’s as if the style-guide-obeying boxes on the homepage start like a well-behaved collection of children, all playing nicely and using their indoor voices and attracting attention in the right way. And then, a new kid shows up, and, even if the new kid is well-intentioned, at least one of the originally happy little campers gets uncomfortable. Somebody’s little box shrinks a little, or there’s a new color in town, or whatever. The decibel level starts trending upwards as anxiety builds. And suddenly…everybody is screaming.

It’s hard to point to a home page that no longer maps to the original wireframes. But it’s equally hard to point to a home page that ages well (unless, of course, it never changes—but we’re talking ecommerce here, remember?). 

In fact, I would challenge you to find any designer who created and launched a redesign of an ecommerce site more than two months ago who still likes the home page.

Here's an example...

I was looking at the vandelay design blog -- which I found through a basic search for ecommerce design inspiration. They do a nice job with their posts...not just the one I reference here. They shared several examples of nice homepage designs (nice in their opinion...I'm not saying I agree with all of them, but still...). Anyways, the screenshots are from 2009, and some haven't been completely redesigned since then, and are therefore great examples:

LaSenza as an example of good design:

And...LaSenza today. Same great boobs, now with extra huge orange boxes: