Everyone knows that top ranked sites get a lot of traffic, BUT is that because they are 'top ranked' or is it because they get a lot of traffic that makes them top ranked?

Which comes first the Chicken or the Egg?

The eternal question, here's a way to answer it, in relation to Search Engines anyway?

First, the major Search engines like Google, Yahoo, and MSN, all have different formulas for calculating how they rank a site and these formulas are always changing so it's impossible to know exactly how to optimize a site for top ranking all the time.

One thing is fairly certain though and it doesn't matter if this changes or not because the means of achieving a top rank will on its own, provide more traffic than we would get from a top ranking position anyway! I'm talking about INCOMING LINKS.

I've seen Log reports from a site ranked consistently in the top 5 positions on all major search engines, which show that less then 20% of all traffic is coming from the search engines, and the rest is coming from incoming and reciprocal links.

To learn more about incoming and reciprocal links go here

Incoming links are links from other sites and pages that send people to our site.
Reciprocal links; are links from our site to someone else's and a link from them back to our site.

Having a large numbers of reciprocal and incoming links is good because while giving us more traffic it also makes us rank highly in search engines. As explained above it doesn't matter if we don't rank so well in the search engines, because we have more traffic from the incoming and reciprocal links anyway. So more traffic better rank, better rank more traffic, it's perpetual motion!
If you would like to see how Alexa determines ranking here's a quote from their site.

'The traffic rank is based on three months of aggregated historical traffic data from millions of Alexa Toolbar users and is a combined measure of page views and users (reach).'

(Taken from: http://pages.alexa.com/prod_serv/traffic_learn_more.html )