My recent return to 1st edition AD&D has been illuminating. Re-reading the books now, I realise that much of what I thought was "wrong" with the game then was a product of my immaturity, both as a person and as a gamer and GM. I've been a D&D player of various editions after AD&D, and many mistaken impressions I established then have followed my play since. Not least of these is the meaning and purpose of alignment, although I have the dubious consolation that I'm very much not alone in that.
Alignment is usually maligned as unnecessarily restrictive, offering a stereotype of behaviour that drastically limits roleplay. It's been accused of stifling creativity and mechanically enforcing play decisions. I've felt this way about it, more or less, for most of my roleplaying career. You can imagine my surprise, then, when I began reading those old books and found that it was never intended as such.
Over at the excellent Gnome Stew, Walt Ciechanowski writes of alignment that "[it] only seems universally acceptable in games where it is an explicit part of the genre (e.g. jedi knights and occult professors reading things that they shouldn’t)." What made this jump out at me is that alignment in D&D was, originally, an explicit in-fiction mark of which sides of the cosmic battles of Good versus Evil and Law versus Chaos the characters had literally aligned themselves with. Alignment was an explicit setting detail.
(Oddly to our sensibilitiese, the Law versus Chaos battle, culminating in Ragnarok, was the more important one. That's why OD&D has the tripartite Lawful-Neutral-Chaotic alignment system that baffles so many modern gamers.)
That detail makes alignment in D&D make so much more sense. Alignment languages (anyone remember those?) seemed odd and out of place to me, but they were actual in-game Shibboleths that people in the game setting were aware of. Gygax noted in the AD&D Players Guide that it was a grave social faux-pas to speak in an alignment tongue in public.
The alignment restrictions also made more sense. It wasn't that only certain alignments could become Paladins or Monks, but that such organisations only existed within certain sides of the cosmic war. Similarly, the harsh penalties for changing alignments wasn't an arbitrary mechanic to enforce behavioural compliance with an even-more-arbitrary rules feature. Rather, those lost experience points and class abilities represented the character's loss of moral compass and place in the world that comes from transitioning through moral crisis, abandoning everything they once thought they understood, and discovering their place in the world anew through a fundamentally different conceptual lens.
Of course, the players of the game who misunderstood that aren't entirely at fault. The game itself, though explicit in a rare few places and implicit in a few others, undermined this by equivocating with the meaning of alignment. Mostly, this happened by over-using non-Neutral alignments. If the typical city-dweller your character comes across is Lawful Good just because they're a townie and thus invested in good government and orderly life, that cheapens the meaning of a character having aligned themselves relative to the cosmic struggle. Monsters are the worst for this: is it really plausible that every random non-animal creature encountered has either taken a moral stand on a cosmic scale, or is in the direct or indirect employ of the greater powers? Perhaps in some campaigns, but even in those the GM would have needed a good grip on the point of alignment in the first place, which wasn't a given.
An over-use of alignment in the original books implied that it was just what people took it to be: a simple indication of a broad behavioural profile. A more sparing treatment of it would have kept it clear and purposeful, maintaining its status as a marker of alignment with a cause.
Of course, later editions of D&D did not share the implied setting that featured such a cosmic war, yet they retained the concept of alignment. More blame for the oddness of the alignment system can probably be laid at the feet of 2nd edition AD&D and D&D 3.x. They no longer had Ragnarok looming in the future to motivate heroes to align themselves with or against the forces of Chaos, yet alignment remained. In these editions, it really did just serve as an odd and inflexible behavioural rule of thumb.
Ironically, though this is essay is overall a defense of alignment in D&D, I do think that it really should have been removed entirely from all editions from 2e on. It's now more of a hindrance than a help, and there are much more interesting and better ways of fostering focused character behaviour and roleplay.