Sigmund Freud wrote in The Interpretation of Dreams in 1900 that academic examinations were one of the most common themes of nightmares. As true today as it was when it was written!
20th century education systems usually assessed students with a big, climactic examination at the end of the module. Whatever grade the student achieves on the exam is his or her standard; whatever he or she got wrong in the exam is a hole in their knowledge, which the student does not go back and master, but rather has to accept as an imperfection in their knowledge.
Examinations do not test how capable a student is or how much they know; examinations test how well they perform on a particular day. We are all familiar with the sight of the overly nervous or stressed student in the exam hall, gnawing the end of their pencil and unable to write what they often know quite well. While many people take exams in their stride, a few suffer deeply from stress and anxiety.
The fundamental assumption underpinning all examinations is that being wrong is bad or unacceptable or must be punished. It is now well recognized that this assumption stifles creativity 
An alternative means of assessment is exemplified by the Kumon Mathamatex system. This consists of 4400 worksheets of mathematics drills, from basic arithmetic to advanced calculus. The student works on the questions on a worksheet until he or she can answer them all correctly in the allotted time. When one worksheet has been mastered, the student moves on to the next. Unlike a traditional examination-based or classroom-based system, the student moves through the course at his or her own pace; there are no inflexible timetables to be kept to. In a classroom situation, the student must move on to the next topic even if he has not properly mastered the first one; knowledge is built on an insecure foundation and this is very frustrating and ineffective. By contrast, with the Kumon model, each lesson is mastered in its turn, building a solid foundation and there is no performance anxiety created by a once-off exam, allowing the student to take pleasure in successively mastering the material. Educators who have implemented Kumon Mathamatex have noted increased focus and interest from students, as well as better performance . This is not surprising when you consider that children master computer games in exactly this progressive, low-pressure, try-it-til-you-get-it way — and computer games are more effective than anything in holding a child's attention.
Modern computer software would make it extremely easy to implement a system like Kumon. The software could display a countdown timer and bring up a series of questions to be answered within the allotted time, making learning almost exactly like a computer game. This could be applied to many subjects. Khan Academy is building this kind of assessment system.
Another notable example of this low-pressure method of assessment without time constraints is the Michel Thomas method of learning languages. The Michel Thomas method is based on creating an experience of successive successes, giving the student a feeling of growing mastery. The method is extremely effective at teaching languages in remarkably short spaces of time.