Hi, I do this stuff for fun. Sometimes people also give me money or prizes for doing it, like Quixey. Thanks, Quixey!

I can't really speak as to whether or not holding programming contests is a good way to do recruiting because I have never worked at a company that recruited that way. I have to think that it is working for someone if many companies are deciding to do it:

http://www.facebook.com/hackercup

http://code.google.com/codejam/

http://www.quixeychallenge.com/

http://itasoftware.com/careers/work-at-ita/hiring-puzzles.ht...

http://www.interviewstreet.com/recruit/challenges/