Rigorous and prestigious departments avoid departmentcest, as they prefer to encourage students to explore different arenas in academia by choosing different schools for undergraduate and graduate work.
Considered slightly incestuous because often members of the same department are often an insular social group that work, hang out and often live (roommates) together. Can also lead to a degree of nepotism.
On the other hand, can be quite common or even encouraged due to the lack of interaction with non-members of the department.
Did you hear Mike and Sally are shacking up? Department-cest!