Over time, we have felt like Valor has taken on too prominent a role, to the point that it risks becoming more important than actual boss loot. This is particularly the case when the tier sets are available on the Valor vendors. We think killing dragons and ransacking their hoard is more epic than shopping at the magic armor store, so we want to shift back toward boss kills being the primary source of epic PvE gear.
In Mists of Pandaria, Valor will be used to power a new feature that allows you to increase the item level of your existing epic items. This means that each week, you can become a little more powerful, hopefully allowing you to kill that boss that has eluded you thus far. There will be a bit of a game in trying to decide when to upgrade your gear versus hoping for a new piece to drop from a raid boss, but our plan is that even heroic gear can be upgraded slightly in this way.
We won't allow you to upgrade Raid Finder gear so much that it becomes better than normal gear, but imagine if you can increase your item level by around eight points. At this time, we're thinking there won't be gear on the Valor vendors at all, but we'll see how that shakes out. Valor will come primarily from dungeons (including challenge modes) and scenarios. You might earn a little from daily quests and raiding as well, but that won't be as efficient.