Right and you can use record type names in formula fields and that makes perfect sense. So you create some record types on the opportunity object as pictured.
Next you add a test record and then open up force.com explorer to query the field and make sure the results are correct:
Now you can reference that field in your formulas on the opportunity object without any problem. What if you want to reference this formula field from another object?
Please note you can cross reference this formula field in APEX or SOQL, it appears that this behavior is unique to validation rules. If you were able to create this cross referenced field prior to salesforce putting the error in place then the cross reference field will return the record type of the child object. Very odd indeed.
The use case here is simple, create a validation rule that checks the record type name of a parent (master detail relationship in my example) object and implement some testing logic.
But when you hit save you will get this error:
Due to this error, you simply can't reference record type names across objects in validation rules (even though you can query them like normal fields in SOQL). This forces you to put this in apex trigger or to cheat and use a workflow rule to update a hidden field with the record type on the object. Neither is an ideal situation. The apex trigger adds development and testing time while the workflow rule with hidden field unnecessarily increases data usage just feels like a total hack
If you have a 3rd way or found a way to make this work, please feel free to comment below and let me know.