I think schools look at where else you're applying to condisder whether or not they'd be wasting an admit on you. Like, if you're obviously tier 1 material, and you apply to 20 schools, most of which are tier one or two, and a tier 4 school is your saftey/no brainer admit, then if an adcom from that tier 4 school looks at your app, and knows for a fact that you'll get into at least 5 or 6 of your other schools, they may not "waste" an admit on you. I've heard of some schools doing this.
Also, if there's some kind of discrepency with your application (ie you plagerized your PS or something) and a school discovers this, they will alert all other schools you applied to and in essence blacklist you for your poor judgment.