Houndstooth, the actual algo is not published, but here are the essential details.
* By design, there is not a way to guarantee (or pay for) top placement.
* Only ads which have been reviewed and approved may go to the top. This means that if you have an ad with top placement, and then edit it, it will no longer be eligible for top placement until reviewed and approved.
* This would be a good reason to create an additional ad with the desired edits, rather than to edit the existing ad, if you already have top placement.
* Ads go to the top when they are seen to be particularly relevant to our users, as judged by CTR.
* The algo weights actual CPC more heavily than Max CPC for top placement.
* For the above reasons, simply paying more (i.e. raising Max CPC) will not directly cause one's ad to move up.
* Ads must meet a particular performance standard before moving to the top. If no ads meet this performance standard, then no ads will go to the top. For this reason, you may see zero, one, or two ads up there.
* The ads (and number of ads) that you see at the top can easily vary from one search to the next, depending on the competitive landscape at the moment of the search.
I hope that helps, although I know it does not really provide the specific details of the algo you were asking about. ;)