It depends.
Our ranking strategy should be the same as yours. We put the people we want the most at the top of the list, and work our way down. Just like for you, I can't be "hurt" by ranking "reach" candidates high -- if they go somewhere else, then I simply get the next person on the list. That's how the math works.
However, there are a few reasons why a program might rank a "less stellar" candidate higher than a "more stellar":
1. The program might want to "brag" that they fill their 10 slots in their top 15. If so, then either they have to be really competitive (so that everyone wants to go there), or they put lesser candidates higher on the list, since less competitive candidates might have had less interviews and hence might want to go to that program the most.
2. The program might want to fill with applicants who ranked it #1, since they are more likely to be happy. Imagine a "superstar" applies to a mid-tier program, and they match him/her. Said person might have ranked that program #10, and you can imagine that they might be quite upset at matching there. In that case, the program MIGHT be better off with a lower ranked candidate who really wanted to go to that program.
Note that reason #1 is pretty bogus in my view. Reason #2 is more valid, although lots of people who match to something less than their #1 (and in fact less than their #10) end up happy in their programs. There's a classic thread about this on SDN somewhere -- a user posts a (drunken, I believe) rant about how programs lied to him when he matched at his #12 and how miserable he would be, etc. Others point out that it's better than not matching at all. He is not so certain. Then, he returns to the thread many months later, and reports that he loves his program an in fact was a blessing in disguise.