Having been a frequent browser of PhysicsGRE.com for a while now, and having survived a tumultuous admissions season, I would like to share my thoughts on the physics PhD admissions process. Going into my senior year, I had a very strong application. I was told by numerous faculty that I would have my choice of any graduate program I would like; however, for reasons out of my control, the physics GRE did not go so well for me. As a particle theory applicant, I was told that I needed to have at least a 900 to have a decent shot at any of the top 10 schools; I received a 780. I explained my situation in my application, and had a recommender write a brief note concerning the GRE score, but, in retrospect, I believe that my attempts to explain my score had little impact on my application. I should have either a) not mentioned it and let the rest of my application speak for itself, or b) had all my recommenders make a point of it to strengthen my case. I am unsure of which route would have been better to take. I applied to nine programs and was admitted to one, albeit one of my top choices from the very beginning, and, in fact, a top 5 school.
The physics GRE definitely matters. I think a high physics GRE score, combined with a high GPA (>3.70) is good enough reason for the admissions committee to not doubt the rest of your application. I do not, however, think a low score calls for automatic dismissal of your application. Here, by low score, I mean a low score that is still within an acceptable range of scores for the program to which you are applying. I do think that a low score (or GPA) does cause the admissions committee to nitpick your application moreso than they would if your score was higher. In my case, I could see some holes in my application. My personal statement might have been a tad too specific with regards to my interests, and one of my three letters was from a faculty member with whom I did not do research (nor take a graduate course from). Moreover, I did not have any publications, which may have been a concern given the amount of research I had done over the past four years.
Nonetheless, while a bad score may keep you out of a number of programs due to nitpicking, it is not the end of the world. If your application is strong and competitive otherwise, there is no reason to be turned off from applying to top programs.