I call this "bike ballet" or "toe pedaling." And you're correct, it's not the proper way to pedal (although you will see folks doing it -- usually newer riders).

If you point your toes down, there are a number of different ramifications to your cycling in general.

First, when you point your toes down, you engage the smaller muscles in the lower leg -- not the more powerful muscles (quads, hamstrings, and glutes) in the upper leg. Of course, if you want to be stronger, you want to use the more powerful muscles.

The second implication is that toe pedaling puts lots of stress on your achilles tendon -- not good.

The other issue is that it's more challenging for you to distribute your weight onto your legs.

While I don't teach folks to pedal with a completely flat foot throughout their pedal stroke, I do try to help them stop toe pedaling. We all have a minute amount of "ankling" that takes place during out pedal stroke -- that's okay.

Try to visualize kicking out/down with your heel when you pedal. This will fully extend your leg and allow you to engage all those powerful muscles.

It takes time to re-learn how to pedal correctly. If you have a difficult time remembering to do it, ask your riding partners to remind you. You could also place a little note on your stem to help you remember.

Once you've learned to pedal the correct way, you'll be amazed at how much more efficient you are.