Sounds like a variant of Electric Mountain in the UK. The same thing is done, only instead of moving trains up the hill they move water instead. There's more in the Wikipedia article - essentially though, this idea works fine.
Can't help thinking that water is the better option (where it's an option at all). Whether or not this method is, as claimed, more efficient - which caim, frankly, strikes me as more of an issue of politics and engineering than of physics - it's still going to take one heck of a lot of trains to store the same amount of mass (and therefore potential energy) as one decent-sized reservoir.