It only works if the product is great. There are a few rocket ships that are great products that have grown with word of mouth that don't have the structural virality (as with Facebook quizzes or the Hotmail footer) - Mint and Dropbox immediately come to mind. Google, as well, if you go back a few years.
It depends on your definition of "works," I suppose. The above "works" for Tagged, but I imagine most people on HN would say that that isn't "working" -- it's spamming.
The best kind, obviously, is the sort people like Seth Godin write about, where people are so passionate that they are actively seeking to spread your product.
Unfortunately it's often easier to fall to the dark side ("easier, more seductive") and spend time optimizing your viral loop than building a product your customers are excited about.
