""Does Google manually edit its results?" Let me just answer that with our third philosophy: no manual intervention. In our view, the web is built by people. You are the ones creating pages and linking to pages. We are using all this human contribution through our algorithms. The final ordering of the results is decided by our algorithms using the contributions of the greater Internet community, not manually by us. We believe that the subjective judgment of any individual is, well ... subjective, and information distilled by our algorithms from the vast amount of human knowledge encoded in the web pages and their links is better than individual subjectivity."
But that is not all, Google Fellow Amit Singhal is going to reveal more about the ranking engine works in some future posts. But for now he has touched most questions regarding Google Ranking, like the one above answered. If you are doing anything related to SEO, (If you are on the web, you are) follow the link and educate yourself.
Official Google Blog: Introduction to Google Ranking
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