Alexa computes traffic rankings by analyzing the Web usage of millions of Alexa Toolbar users and data obtained from other, diverse traffic data sources. The information is sorted, sifted, anonymized, counted, and computed, until, finally, we get the traffic rankings shown in the Alexa service. The process is relatively complex, but if you have a need to know, please read on.
Source:
http://www.alexa.com/site/help/traffic_learn_more