Yes, it is done. The effect is like having two peep sights--one on the string and the other on the sight. I used to shoot this way---well let's just say a few years ago. I actually used a 1/2" brass ring up front that accepted different size aperatures. I commonly used a 1/8" as this is what worked best for me.
The concept works because your eye centers the target in the ring, although not as precise as one might think. The results are sometimes amazingly accurate. Another reason it works is because most people want to see what they are aiming at, and covering it with a pin just messes with the mind. So with just the ring you can see the bullseye.
You see this more often in indoor target archery.