That's a great question! The issue of merit pay vs. teacher tenure has been a hotly debated issue recently. Merit-based pay, or performance pay, essentially means that teachers are paid based on effectiveness - as measured by student achievement. Outside of education, merit pay is commonly used. If an individual is successful at his job, it is not uncommon for him to be rewarded monetarily. However, some people have issues with the possibility that merit pay for teachers may allow for favoritism, and may not necessarily reward hard working teachers, but high test scores.
To read more about merit pay, check out a similar question asked by another member that I've linked below. There, a superintendent (and educational expert), as well as a teacher, weigh in. I've also included a link to a great article that breaks down some of the arguments for and against merit pay.