I often over-tip, but I will tip low for bad service.
On the other hand, if an establishment is extremely busy, waiting does not equal poor service. If it's too busy for you, go someplace else. If you're in a pub and it's jammed 
 to elbow with people drinking, and you want your fine dining experience, you're probably in the wrong place at the wrong time. Go somewhere else.
Tipping is not mandatory, but if you are in a large party, then a service charge is generally standard practice, and the charge is generally printed on the menu. At that point, it's mandatory. If you don't like it, go someplace else.
Most restarants have a mandatory service charge for parties of six or eight because cheapskates will come in and tie up a large table all night, keep a server busy for hours, run up a bill of $200-$300 and then leave a $5 tip. If you're over 18 and don't already know this, you don't get out much.
I think it's ridiculous that the police handcuffed anyone over this, but they're probably covered under a "failure to pay the innkeeper" statute for making the arrest. I doubt the charge will hold up in court, though.