I have played in such a system but not for a long time. Players are ranked on a list, highest on the top rung. You can challenge up to N spaces above your level. If you win, you take the space of the person you beat and everyone between shifts down one. I think the ladder can continue indefinitely. Matches are scratch.
I'd guess that a main problem is that you will tend to be playing the same 5 or 6 people all the time. The up side is that no handicaps are required.