From http://www.quakedev.com/forums/index.php?topic=1221.0:

bg_pmove.c in function PM_WalkMove:
[snip]
/* this is what causes the rebound bug:
   if velocity is { 0, 0, 300 } here, vlen is 300 (duh)
   but when you hit the ground the CLIPPED vel is { 0, 0, 0.3 }
   that's normalised properly, but then scaled by the ORIGINAL vlen
   so you just shoot straight back up

   vel = VectorLength(pm->ps->velocity);

   // slide along the ground plane
   PM_ClipVelocity (pm->ps->velocity, pml.groundTrace.plane.normal, pm->ps->velocity, OVERCLIP );

   // don't decrease velocity when going up or down a slope
   VectorNormalize(pm->ps->velocity);
   VectorScale(pm->ps->velocity, vel, pm->ps->velocity);
*/
   PM_ClipVelocity( pm->ps->velocity, pml.groundTrace.plane.normal, pm->ps->velocity, OVERCLIP );