This is actually one of the first and greatest innovations Linus Torvalds achieved with Linux. While the GNU folks developed the idea of free software, they limited themselves by sticking with a just a tight group of core developers, who largely would ignore suggestions and patches from outside. It was Linus' belief that everyone had something valuable to contribute that led the style of open-source development that now dominates the world.
It is maybe an excess of hope to say it "dominates the world".
There is still entirely too much "fauxpen source" software, where corporate dev teams or small mentally incestuous groups emit "releases", while sitting behind legal and social barriers to outside contribution and feedback. The tightly coupled development process results in tightly coupled and poorly documented software, which is hard for "outsiders" to contribute to, and the resulting feedback loop spins around until the software is so knotted up that useful development basically stops. (Of course, closed source software has the same problem, only worse.)
The open development open community model does avoid this problem, and so it's use is spreading.
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