I found this great position paper (PDF) on the web from an architurcture firm Van Mell Associates titled "Why We Don't Bill by the Hour." Some excerpts:

To value each hour of work equally and to price and manage each hour is as corrosive a policy as any creative group of professionals could devise. To pretend that each hour is worth the same as every other is ridiculous. A brilliant insight can come in a flash, and save a client from disaster or find him millions. Other hours are dull or wasted and lead nowhere. It’s clear that billing by the hour is unfair to everyone.

Of course, professionals, like everyone, must track their time and their staff’s time. But tracking each hour draws the professional’s eyes away from the client’s needs and toward the professional’s own reward. Whether measured by the hour or minute, the client completely depends on the advisor's honesty to price and record their work effort fairly. Of course, professionals, like everyone, must track their time and their staff’s time. But tracking each hour draws the professional’s eyes away from the client’s needs and toward the professional’s own reward. Whether measured by the hour or minute, the client completely depends on the advisor's honesty to price and record their work effort fairly.

Of course, we still need a way to manage our time, both for efficiency and for estimating the work needed in a new assignment. Our solution: a Good Day’s Work. This unit avoids false precision and is based on our honest judgment of worth using even increments of 10%. If we honestly feel we put in 10% of the day working hard on a client’s problem, that’s what we record. If we honestly felt we worked hard, but only for a few minutes, we don’t record it. If we see we’ve helped the client enormously, frankly, we round up.

This is the best articulation of the benefits of value billing by a company I've yet seen on the web. Read the whole PDF to learn more about the Good Day's Work and the innovative ways this Company treats its relationship with its clients.