These tiers are determined by usage. They are organized every few months according to a CO/Tag's usage by a certain percentile of players in ranked free-play. The higher the tier, the more narrow the percentile sampled. The idea of using different percentiles for each tier is that high-ranked (and presumably skilled) players will have a better grasp on which COs and strategies are stronger; but also because if a high-ranked player experiments and consistently loses, their rank will take a nosedive and their experiment won't affect placement in that upper tier. There are still ways to skew that result, but said skewing will generally last for only a single placement period, after which the system will self-correct. Lastly, popularity in a higher percentile takes precedence over lower percentiles; i.e. if a CO/Tag would qualify for both the OU and UU tiers, it will be placed in OU because the stats of the top 20% of players takes precedence.
The purpose of these tiers is to set brackets for tournaments during a particular placement period.
This tier is determined by the top 20% ranked players. COs/Tags make it to OU if their usage by those players exceeds a certain percentage determined by the number of COs/Tags present in the game; so in AWDS, with just a little under 400 of these, that percentage would be about 3-5%. (Games with lower CO/Tag counts would undoubtedly have higher thresholds.) The OU bracket represents COs that have repeatedly proven to be a major cut above the rest during the previous placement period.
OU placement happens during the first judgement round. All COs/Tags ranked as OU are removed from the later judgement rounds.
This tier is determined by the top 40% ranked players. These COs and Tags are less common in competition due to hindering flaws cropping up in various maps, lack of usage, or just being out-classed. The percentage required to enter is the same as OU, because while the judgement pool is smaller, so is overall usage.
UU placement happens during the second judgement round. Factions that make it into UU are removed from later judgement rounds.
This tier is determined by the top 60% ranked players. COs and Tags that are majorly flawed or just easily out-classed will tend to find their way here. They may also just be suited to a very particular niche when playing against higher tiers. Think Lash or Jake in AWDS. Like UU, the percentage required to enter is the same as OU, for the same reasons. In a smaller game, this tier might be removed altogether.
RU placement happens during the final judgement round, so no further removals are required.
Exactly what it sounds like. There is no judgement round, as these are simply COs and Tags that didn't make the cut at all for the competitive tiers. These factions are almost never seen on the competitive field due to being limited, weak, unpopular, or some combination of the three. Anything deemed to be a game-breaker, but not utilized enough to ever get banned, is also likely to end up here.
Another set of tiers exists to organize COs and Tags that are obviously too powerful for their assigned tier, but aren't used enough to be placed higher. Like the usage tiers, banning tiers are determined from ranked free-play and used to structure tournaments and leagues. Bans are only applied to factions that have been used in at least 10 games over the course of a placement period. They are set after the judgement rounds end.
Total Ban (TB)
Uber factions land in this bracket when their winning streak against other Ubers is >60%. They cannot be used in any leagues, and in ranked games may only be fielded in free-play and anything-goes tournaments. TB factions can be placed here permanently by community vote, and be later removed by the same process.
This level is half ban-list, half tier unto itself. OU factions land here when their winning streak against other OUs is >60%. Because there is no proper tier above Uber, it has its own tournament and league. Uber factions can be placed here permanently by community vote, with the caveat that they can still be moved up to TB. They can later be removed by the same voting process.
The first of 3 ban lists by this name, BL is for UU factions who have a >60% winning streak against other UUs. They are considered too strong for the UU metagame, but aren't used enough to qualify as OU. BL factions are banned from UU, but may be used in OU and Uber if desired.
Borderline 2 (BL2)
Same as BL, but for the RU tier. They are banned from RU, but may be used in UU, OU, and Uber if desired.
Borderline 3 (BL3)
Again, same as BL, but for the NU tier. They are banned from NU, but may be used in RU, UU, OU, and Uber if desired.
Why do this?
A system like this ensures that a tier list is automatically kept up to date according to actual gameplay, rather than allow community bias to creep in. It is not without its flaws, but in general this system is able to self-correct in the event of unusual trends or trolling cropping up.
If there's a gaping flaw in this system that I've missed, please let me know, because I want this system ready to go when CWT's online multiplayer launches.