Blender had the experimental feature set enabled, and the scene has an object with a subsurf modifier set to 4 levels. Its material has an image texture plugged into its displacement socket.
A copy of that object with its origin in the same place is on another layer, with the material removed, and given a Blender Render material. It is properly UV unwrapped to take the displacement on the first object as a displacement map. I used the technique in this answer for that, as it is perfect for maps of a world. It has just enough faces to serve as the base geometry for that map.
When I click bake, it produces this smooth gradient:
The method is taken from this tutorial. I have been looking for where I've gone wrong. What is the issue here?
Edit: Here is the file