Well, I haven't been able to follow the inception of the whole NXT-concept, but from what I'm reading, I guess this is a pretty smart move, especially in this day and age. As far as I can tell, this is somewhat borrowed from Eric Bischoff's "Celebrity Wrestling" concept, but to me seems a smarter evolution of that approach in so far, as it is geared toward helping the entire WWE product in the long run, instead of just being a stand-alone-show that will have no lasting effect whatsoever.
Now, what I see in this move is that WWE has realized that it needs to go with the times, and considering that "reality" shows are pretty much all the rage right now, it was a natural conclusion to move into that genre somehow; even though it is probably quite a bit harder to mesh the pseudo-"reality" of reality shows (which mostly are scripted anyways) with the suspension-of-disbelief-"reality" that wrestling is in and of itself. And I believe it will be very interesting to see how WWE intend to pull off that mixture of reality show with the keyfabe world of pro wrestling, and how much of what we will get to see will indeed be "real" or how much will be scripted; I think it is an interesting concept to even further mix up reality and fiction in this way, since this has always been when wrestling was at its best - when reality and fiction got so mixed up, that people could no longer tell what was "real" and what wasn't. And if NXT can exploit that concept, this could be a win-win situation, both for the new brand as well as for WWE as a whole.
For the basic idea is simply: emotional attachment. It's what makes shows like American Idol and its countless spinoffs work so well. People watch the cast members go through the trials and turmoils of the shows, and then succeed or fail; but no matter who wins in the end, and no matter how good they really are as musicians: people usually buy their albums in gigantic numbers right from the get-go, regardless of how good (or not) they are - simply because they have become emotionally attached to the characters on the show, and then "instantly like" their music.
And I think that is what WWE is gunning for here: instead of "wasting" time of building new talent by having to push them on the regular "flagship" shows (which then in turn takes time away from the already established people, those who already are draws and generate money), they use the NXT brand to build them up; through the "reality" effect of e.g. showing more about the people's "real" history, background, family, maybe some of their emotional state etc..., they get the audience to care more about those people than about some random newcomer who is tossed into the ring a few weeks in a row with the likes of Triple H, John Cena or Edge on RAW or Smackdown.
And once this emotional attachment is established by way of the "reality" portion of NXT, I guess WWE is looking to have an "instant star" when the "winner" finally is moved to one of the "official" pro brands, without having to spend months and years of building them up, or at least significantly shortening this buildup time.
I guess it will really depend on how well WWE can execute this mixing up of "reality" elements and scripted "pro wrestling" elements, and how the audience reacts to that... but I think it's definitely an improvement over the old ECW brand. Not that that would have been bad per se; it was what it was, and it was used to build up younger stars before they "move up" to RAW or Smackdown; but essentially, it was still the same concept of a show like RAW and SD, only with people no one (really) cared about.
Now you still have people no one really cares about (yet), mixed with some mid-card talent (who now also are able to gain more exposure through these additional appearances, which also helps them establish themselves in peoples' minds), but in a different concept that might make better use of precisely the non-stardom of these newcomers, by exploiting the "learning process" and "slow progress" element of casting/reality shows instead of having to work desperately to make people, who obviously are nowhere near real superstars yet, look halfway believeable.
So this might be a pretty smart concept, but of course it remains to be seen how well it can be executed, and if the audience really buys into the concept.
