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I am not 100% on this.....but here goes:
I would think that it is a mixture of things:
1) Link pop
2) How many visitors and hits you get
Straight from Yahoo:
What is the "Most Popular Sites" feature?
In some Yahoo! categories, you'll notice a "Most Popular Sites" section. This area features the sites that are currently most popular among Internet users. The section will change and update as new sites are added to the category, and as others become more popular or less popular with users.
I believe this is directly related to the amount of link popularity. I have a couple of sites which have achieved the most popular heading in a very very competitive category. One of them was given no description and certainly didn't pull more traffic than other sites in the category. The only thing they have going for them is that they were both linked up with about 30 sites I have which are listed in DMOZ and rank well in Google.
Many of the other sites in the category I'm competing in are more spam than anything also. So site quality in the eyes of the editor is probably also a factor.