Reference checking a candidate is standard protocol for vetting a potential new hire. But I wonder how effective this step actually is. Basic human psychology seems to influence the accuracy and usefulness of many of the references.
The person providing the reference has two relationships to consider: the one with the candidate and the one with the hiring manager. The relative strength and usefulness of each of these two relationships influences the nature of the reference given.
First, if the relationship between the referer and the hiring manager is stronger, then the referer has an incentive to provide an accurate picture of the candidate. This is because the referer has "more to gain" through the maintenance of her relationship with the hiring manager than with the candidate. Both strengths and weaknesses will be accurately depicted.
Next, if the relationship between the referer and the candidate is stronger, then the referer has an incentive to provide a positive picture of the candidate. The referer is unlikely to outright lie about the candidate's qualifications, but is likely to focus on the candidate's strengths and positive contributions and gloss over the shortcomings. The referer has more to gain from her relationship with the candidate than with the hiring manager, and will thus lean towards helping the candidate regardless of the exact situation.
In most cases, the referer has worked with the candidate before while never having worked with the hiring manager. This means that the referer is generally predisposed to helping the candidate rather than the hiring manager. This is particularly the case when the referer is listed as a reference on the candidate's CV.
Lastly, even if the referer's relationship with the candidate is weak, it is still stronger than the nonexistent relationship with the hiring manager. Thus this situation reduces to the case where the candidate's relationship with the referer is strong. However, if the referer thinks that it would be a bad idea to piss off the hiring manager or their organization with an inaccurate picture of the candidate, the situation may reverse itself.
In the end it's all about incentives, and I don't think the incentives are properly aligned for most referers to give accurate depictions of candidates.