In my opinion, certain things should be tested by giving the students an assignment that challenges their use of knowledge. This way I will know that they understand the topic or idea, versus simply memorizing a definition or the steps to a process. I want them to know why they did something, or why something happened. I see this problem a lot in math. Students will follow a process of steps without knowing why they did something, or what that step did and how it got them closer to their answer. Memorizing steps may get them an A on a test; however, when they build on that knowledge without knowing the reasoning behind the simple steps, they will have trouble understanding how to do complex problems. I feel as though projects and other activities will build this kind of knowledge in my students better than studying for a test.
As a student now, I prefer projects, writing assignments and presentations better than tests because I experience this ideology in my own education. When I prepare for a test I learn only what I think will be on the test. I often only learn the surface value of the topic and I don't go into in depth application of the knowledge. Using the knowledge in "real life" application scenarios versus simply being "quizzed" on their understanding helps move the knowledge deeper into their long term memory.
Going about creating these projects as a teacher or as a student can be a difficult task. I have come to learn that rubrics are my best friend. They help clarify what my teacher wants from me as a student, and they help grading as a teacher. While doing projects myself I often have the problem of not knowing what to include or what direction to go. Teachers that share their rubrics with students provide a concrete mold that I know I need to fit. Making students guess what they need to do to make an A is not teaching. I fully support leaving room for students to do be flexible and make projects their own, however, they should know ahead of time where the points are coming from. As a teacher, using a rubric helps grading in that it is consistent and uniform. It also helps to plan the project before sharing it with students. Sometimes it can be hard to decide what I want my students to present to me. Making a rubric helps these decisions and it also helps me to decide what is more important in the project and what isn't. Basically, rubrics serve as an additional set of instructions that helps build the assignment and guides the student.
*photo credit to cybrarian77 (flikr)*
http://learnweb.harvard.edu/alps/thinking/docs/rubricar.htm
This website that explains why and how to use rubrics along with tips on creating them.