I feel funny chiming in, but I think this discussion warrants both sides being represented, and have noticed other instructors adding their thoughts.
First of all, there are as many types of instructors out there as there are people. Some are in between college and work, and doing it for the free season pass, the experience, camaraderie, or simply to improve their own skiing. Others, teach as a hobby on their days off, and finally there are a minority that pursue it as a career.
I would bet that most of us would continue to teach even if we never received a tip. On the other hand, we figure into our anticipated seasonal income that a certain percentage of our students do tip, and have come to rely on that to pay our living expenses.
The vast majority of career instructors have to keep a night job, thus limiting in my opinion the quality of their skiing and instruction during the day.
I also know that many of us prefer to ski with students that are appreciative and fun to be with, rather than catering to demanding and unpleasant high rollers who dish out 100 dollar bills at the end of the day.
I do think it is important to recognize that very few ski areas reimburse their instructors for proffessional training and certification expenses, or insurance expenses. Many instructors have dedicated years to gaining the knowledge necessary to really make a difference for their students.
While the guest spends many hundreds of dollars for an all day private, it is only after many years of employment and personal traning experience that an instructor can hope to see at best maybe 30% of the lesson expense in wages. Often times the instructor earns closer to 8-15% of the lesson cost.
Additionally, a work day is at best 7 hours, though often much less, but we are expected to show up for the days we are commited to work, in some cases 7 days a week during holidays, and it is not unusual to work 50%, or in this economy 25%, of the time that we are in uniform. We also need to remain available to teach throughout the day though we are not compensated for being on call!
While it is clearly a choice to teach, it would be untrue to say that tips do not matter to those that have made it a career. Our european colleagues experience vastly different work and compensation conditions. Similar to restaurant workers, who do receive tips.
I still think the best "tip" is a huge smile and the thank you for helping a student experience an epiphany type of moment in their skiing. But, as one of the replies seemed to stress, please let your ski school know if you think their fees are excessive, and ask them how much the instructor earns if it helps you make a decision in regards to tipping.