The technique that Greg is referring to is sometimes known as nibbling.
Some people do it because they are using a false ID to bid up their listing. (that is illegal) Some people do it because they want help their seller buddy bid up the item. (illegal if they made any direct/implied agreement to do so) This type of activity is sometimes referred to as shill bidders/bidding.
Many people do this at some charity auctions, where pretty much most people know everybody else and it's pretty much expected that your buddy is going to try his best to make your charity bid get bumped up as high as possible. In that case, it's all in good-natured fun, and is not considered shill bidding (my opinion).
Back to nibbling...
Some people do it as payback for having lost out on a previous auction to you.
Some people do it to protect their own bidding -- a warning that if you bid on items I'm interested in, then I'm going to bid on items you are interested in. In other words, you cost me, then I'm going to cost you.
Some people do it just to see how high somebody was willing to pay for it. I've watched as some bidders got curious and caught someone who had entered a ridiculously high bid (we are talking $100 for somewhat common item), not thinking that someone my try to bid it up. It was not an accidental bid, just foolish high bids. You know they didn't do that again afterwards!
Yeah, you know I used to spend a lot of time watching the internet bidding action. It's quite interesting studying the bidding habits/techniques of others. Please note, obviously I don't condone any of the above activities (other than bumping up charity bids