I was in the UK and the continent in the 70's. At that time most restaurants added a 10% or 12% service charge and only Americans tipped. As I recall, service was good.The restaurant has to pay minimum wage if the server does not make enough in tips. Only the worst waiters will not make significantly more than minimum wage via tips though.
By allowing the servers to work for tips, i.e. work for merit reward, wages can be kept low which keeps the cost of the food seemingly more affordable for more patrons who then leave more nice tips for the servers. It may seem a bit strange to do it that way but all the people in the industry, including the servers, want it that way.
The 20% was rather artificially pushed in order for restaurants to attract and keep great servers. I've been told by people in the industry that we can expect that 20% norm to increase to 25% in our foreseeable future.
When I was in college I worked as a server in several restaurants. Bad service was rarely the server's fault. Typically, it was do to problems in the kitchen or not enough servers. Yet, tips were down even when servers were not at fault. This is why I favor sharing tips as a good dining experience depends on not just the server but kitchen help, busboys, hostesses, and cashiers.