I believe that portfolio grading helps students practice and understand their writing processes.
It seems to reinforce the notion of revision even if some students don't revise as globally as they might.
Students seem to do more analysis of their own writing, in terms of effectiveness because they are able to compare pieces as they prepare their portfolio and write their extensive postscripts. (These postscripts prompt them to review their writing processes over the long term as they prepare a portfolio of their writing.)
I also believe that having students submit portfolios requires students to take responsibility for their education. They must make more choices concerning whether or not their writing is effective and prepared for their audience and readers. They must stay organized. Students must stay on top of things because there are more due dates to be aware of for drafts and sections of the portfolio.
Portfolios tend to give students a sense of accomplishment.

The following is how I present portfolio evaluation in the policy and procedure sheet:

2. Portfolio Grading - The first eight weeks of the semester you will be working on a portfolio. You must prepare one portfolio of your best work. The portfolio must include at least 12 pages and must include at least 2 pieces but no more than three pieces. Drafts must be submitted in each portfolio. As an instructor, I want to be able to verify that each student's writing is improving and that students are working to hone their writing skills and abilities. No credit will be given to portfolios that do not have drafts included and do not show that the writer has been revising the pieces throughout the course of the eight weeks. Each piece included in the portfolio must have been workshopped in class, and the workshop sheet must be submitted with the piece in the portfolio.

3. Drafts-in-progress - From time to time I will ask that you submit a draft-in-progress for me to comment on. When I read these drafts, I will suggest possible revisions for the most striking feature; I do not comment on every possible problem in the paper. Please remember that my comments are suggestions and not prescriptions. Note also, that you must revise for other problems or weaknesses that I may not have commented on. Even though I will comment on drafts and as a class we will have regular in-class workshops during which your classmates will also comment on your papers, remember that you are in control of your writing. You should consider the comments of your readers, but don't expect them to do all your rewriting for you. Failure to turn in drafts-in-progress when collected will result in the lowering of the portfolio grade. Please note that you may also submit intervention drafts anytime. I will arrange to turn them back to you the next class period or soon thereafter.