As Tim B explained, there are many good reasons for moderators to have the power to take immediate action, sometimes even in the face of community disagreement. This is not just limited to putting questions on hold; it also includes deleting posts, marking as spam, and at the extreme end even destroying entire user accounts and feeding them into the spam-fighting systems, or request destruction of user accounts along with all contributions made from that user account.
This power is sometimes necessary in order to efficiently moderate the site, and it is a power that I dare say that all moderators use with care.
Most of the time when moderators step in, the situation can broadly be classified into one of three major categories:
- when the community cannot handle the situation on its own for some reason
- where there is community disagreement as to the proper course of action and a decision needs to be made as to the correct action to take
- when a post needs to be handled and is an utterly obvious case (for example, blatant spam or totally off-topic)
You also have the possibility of the community largely having stepped in already, and the moderator only adding a final or near-final (say, in the case of putting questions on hold which requires five votes, vote number four or five) vote, thereby effectively participating as one of the larger community. Another possibility is to simply leave a comment or bring the issue up in chat, but leave the voting to the community; a moderator's opinion tends to have some weight even without a binding vote. For uncertain cases where the moderator wants to take some action, one of these is often preferred over a binding vote.
Appointed or elected moderators are held to an even higher standard than the rest of the community. In the words of A Theory of Moderation, which guides moderation on the Stack Exchange network, emphasis original:
As a moderator, your actions now represent the community, so you will be held to a higher standard of behavior. You are an ambassador of trust, with the same sorts of rights that the official development team and community coordinators have.
Your goal is to guide the community with gentle — but firm — intervention. Respect your fellow community members at all times; demonstrate fairness and impartiality in your actions.
None of the moderators on a site operate in a vacuum; moderators normally regularly cross-check each others' actions, and discuss actions that are under consideration, not just with each other but also with other moderators in the Stack Exchange network, as well as the Stack Exchange (the company) community managers if it becomes necessary to escalate an issue that far. Every moderator has access to the full log of moderation actions taken by all other moderators on their site; this includes everything from the mundane to the extreme. All moderators (both elected and appointed) on the network have access to a special chat room where issues can be discussed with other moderators on other sites in order to benefit from the experience of moderators who have faced similar situations before. Most, if not actually all, sites on the network also have a site-specific moderators-only chat room for discussing issues local to the site; Worldbuilding does have such a chat room which is frequented by the moderators.
In many cases, particularly in cases such as putting questions on hold, the community can actually in a manner of speaking override a moderator's decision. A moderator can put a question on hold with a single vote, but it takes only any five community members with the cast reopen votes privilege to reopen the question; and on our site, this happens quite regularly when a question is put on hold, fixed and reopened. A moderator can lock a question, which prevents the community from reopening it (or doing just about anything to it), but there is a special list of locked questions in the moderator dashboard so doing so inappropriately is highly likely to draw the attention of the other moderators. A question that repeatedly gets closed and reopened is going to draw some degree of attention. A locked question can still be flagged for moderator attention, drawing the attention of the other moderators on the site. Or a moderator can be pinged in our general chat room.
If a dispute cannot be settled simply by discussing the matter among the moderators (which it most often can be, if there even is a dispute in the first place; see above about utterly obvious cases), then any moderator can escalate the issue to a community manager. The CMs are spread around the world and a situation can often be resolved within hours or less at any time of the day or week in urgent cases (and, not uncommonly, also in non-urgent cases).
Users always have the option of bringing things up either in chat, or on the site's respective Meta site, if they disagree with the actions of any moderator. It is also a well-established practice that moderators do not handle flags that relate to themselves, either leaving them unhandled or specifically requesting that another moderator look at them. If multiple moderators are involved, this may also involve escalating an issue to a community manager.
In extreme cases, and hopefully only ever as a very last resort, any user can use the "contact" link at the bottom of every page to contact Stack Exchange directly, completely bypassing the moderators. This choice exists, for example, for users who feel like they have been approached inappropriately by one or more moderators and the normal courses of action available to users do not result in corrective action.
And of course, moderator powers are always subject to the continued approval of Stack Exchange staff. This applies to both appointed and elected moderators. There have been cases where moderators have been stripped of their diamond powers for taking what was considered inappropriate action.