It is just selecting users based on the videos you have watched. It isnt global popularity ranking, rather its ranking amongst users who also watch your videos.

Your watching a video is only a weak correlate of your preference. If I were recomemnding you something, I wouldnt ask you -- literally -- what specific videos you watch. I'd ask for your (real) preferences: are you bored right now? Do you want somerthing exiting? What's your mood? etc. etc.