My questions are:
(1) Is there a full account of this system written anywhere?
(2) Why was this system used and why and when was it discontinued?
(3) Does anyone still use this system or play games with odds?
(4) Is it possible to estimate grade differentials for various odds used?
My answer for (2) would be that odds games are not good for beginners trying to learn opening theory, but might have advantages for other reasons (such as assessing playing strength). For (3), I've never played games at odds against anyone (unless you count losing a piece or pawn in the opening and playing on). Regarding (4), I suspect that for anything more than a pawn, you can only really estimate how low the grade of the opponent would have to be to be unable to carry out a "technical win" against a competent player (below a certain level, you can nearly always assume a player will miss simple threats and drop material).
I don't have a clue as to when the system was discontinued, but presumably there was a debate in the chess literature of the time that would help answer question (1), though if there is an overview account of this anywhere, published more recently, it would be great if someone could point it out.
I would be interested to know if anyone has ever (in more recent times) tried odds games for assessing someone's strength, or for teaching juniors. I would guess not, but you never know.
EDIT: Found some answers here:
http://en.wikipedia.org/wiki/Chess_handicap
I wonder how much material I would have to remove from Rybka (or any chess engine) before beating it... I probably don't want to know.