Google posted an article on their blog about their ranking algorithms.
Amit Singhal (in charge of the ranking team at Google) writes about the "no query left behind principle where all queries are dealt with efficiently, how they work very hard to keep the system as simple as possible without compromising the quality of their results (10 ranking changes are made every week), and how there is no manual intervention. Human editing is too subjective and additionally "often a broken query is just a symptom of a potential improvement to be made to our ranking algorithm."
There will be a follow-up article as well, which will be well worth reading. It's very accessible and quite interesting. It should sort out a few of those rumors.
Google made 450 changes to the algorithm last year (Udi Manber- search quality at Google). Improvements are constantly being made and usually for the better. Not all changes are detected by the general public and are subtle, others are evident as fluctuations in the results happen. Recently I noticed very competitive keyword rankings fluctuating significantly on a daily basis. New sites appearing, dropping out the next day, different sites at number 1-5, etc...
Why you ask? Oh I have loads of theories, but they're only theories, and speculations and a bit of fun. I mostly believe the ranking is determined by the number of letters in the URL. Only kidding :)