AMD's microarchitectures have a shorter pipeline because AMD and Intel have differing approaches to computing. There's more than one way to process data & instructions! A shorter pipeline means more work is done per stage, while Intel's longer pipeline achieves faster clock speeds by doing less work per stage. It's just a different idea of how to get things done.
No, a shorter pipeline doesn't automatically mean less performance. There's not necessarily a drawback there. The Athlon64 3200+ goes head-to-head against Intel's P4 3.2GHz without a problem (they trade blows depending on the app used) yet the 3200+ operates at only 2.2GHz. So where does the extra 1GHz in performance come from? AMD's K8 microarchitecture has a much shorter pipeline, which results in smaller hits during missed branch predictions, a higher IPC, and a shorter active lifetime of instructions per clock cycle. Put more simply, a shorter pipeline is more efficient and powerful per clock cycle.
This of course leads to the question "why don't we just all use CPU's with really short pipelines and slower speeds?" Well, because this doesn't make life any easier, either. Regardless of how efficient or fast a CPU is, the fact of the matter is that both AMD's and Intel's CPU's get the work done. In the eyes of the end-user, who cares how it gets done? AMD spends its time maintaining a shorter pipeline, while Intel spends its time feeding a longer pipeline. Both approaches are valid and both work equally, just at different clock speeds. Neither one is easier to design, so why worry? I personally find the duel to be very interesting, as it lets us see just which approach is better suited to different tasks. For instance, Intel's longer pipeline and fast clock speeds are better suited to content creation where the same type of work is done over and over again. AMD's shorter pipeline and slower clock speeds are better suited to gaming where the data and type of work are changing constantly. And of course, Intel is no stranger to short pipelines - their own mobile-inspired Pentium M microarchitecture achieves its incredible performance with a short pipeline and simple features, much like Intel's older designs (Banias & Dothan are really revamped P6 cores).
The next big thing for CPU's is the dual-core idea. Coming to a PC near you later this year, Intel and then AMD will release their dual-core CPU's, which feature two CPU cores in a single package! Tossing aside the design issues for a moment, the advent of dual-core CPU's will be the biggest thing to hit PC's since the Pentium introduced the fully-pipelined super-scalar idea! Performance with receive a nice boost and the overall feeling of speed on PC's will increase. And with software that is designed to be multi-threaded, processing will happen faster than ever! Intel has had such success with their preliminary testing of a dual-core P4 at just 2.8GHz that they scrapped plans to release the 4GHz P4. That gives you an idea of just how big this will be...