I heard that at Valve, it's by team consensus. I may be wrong though.

Ah, so everyone's boss is the sociopath who's good at whispering campaigns. Swell.

I think the proceedings are open and transparent and the employee whose employment is in question would be a part of them. They could start with a group meeting where a discussion takes place about team members' misgivings about the performance or contribution of said employee, with a chance for him/her to respond. After a couple of rounds, if the concerns are not addressed then a decision is made to let them go.

Without wishing to seem unnecessarily combative, you are being naive. Nothing about a meeting being open prevents the possibility that its outcome has been fixed.

You don't want to work with idiots who want to fire you just because of a "whispering campaign" anyway...

The easiest person to dupe is someone who thinks he's too smart to be duped.