I've been using whiteboards for 2 decades during the interview process and they work great, if you ask the right questions. I've built great engineering teams at companies like Orbtiz and whiteboards were one of our best tools.
The reason they are important is that they are part of every engineers day-to-day work. We use them to collaborate and design and understand.
Therefore, if a candidate can't whiteboard a design, solution, architecture, etc. in a manner that other engineers can understand it, they are going to struggle.
That being said, the way Google and other companies use whiteboards is an epic fail. Asking someone to code on a whiteboard is stupid. Asking them to solve algorithm puzzlers on a whiteboard is lame. This isn't how we use whiteboards every day so why should a candidate be expected to use them this way during an interview.
The reason they are important is that they are part of every engineers day-to-day work. We use them to collaborate and design and understand.
Therefore, if a candidate can't whiteboard a design, solution, architecture, etc. in a manner that other engineers can understand it, they are going to struggle.
That being said, the way Google and other companies use whiteboards is an epic fail. Asking someone to code on a whiteboard is stupid. Asking them to solve algorithm puzzlers on a whiteboard is lame. This isn't how we use whiteboards every day so why should a candidate be expected to use them this way during an interview.