I think Adil and James have said it all. Pay Hikes have NOT rewards, they are not even a way to say thank you. Its about saying ...Dear Employee, you are valuable to our organisation upto this value... To be more valuable you will have to work more harder and be rewarded for any out-of-the-way work that you do.
Promotions on the other hand are about the future role of the employee using his performance stats diring the last few years/months. In todays companies, agile deliveries & 90 day cycles make it necessary that employees keep changing their roles. Therefore it is important to have quaterly performance analysis on an employee and promotions not based on yearly performance.
The over all gist is that this brings satisfaction to the employee that he will need to move on to newer work get a promotion and not get stagnated. As well as get pay rises with no relation to Promotions. Promotions and Pay Hikes are related to performance and vise versa, but they are definitely not related to each other.
