Is the practice of 'tip pooling' very widespread?

My sister works at a waitress, and she told me that the waitresses all pool their tips and split them up evenly at the end of the night. I think that this is a horrible practice, and that it is unfair towards the staff and deceptive towards the customers. When I receive exceptional service I leave a generous tip, uming that it will be given to my server as a reward for their hard work. The idea that it might be being distributed to people who don't work as hard is very disheartening. And the way she explained it, new waitresses are pressured into doing it by the ones who already work there. Is this practice very widespread? My sister worked at a small family restaurant, while I prefer more upscale establishments. Is this practice as common in fine dining?