How does genius on iphone work?

I'm intereeged as to how the 'genius' setting on the iPhone works. This is available on both the App Store, do that apple can help you locate an app that you would like and use, by basing it on an app that you already have. It also can create a 'genius' playlist, using just one song.
I'd like to know if there's a equation or guidelines that they use?

Genius for Apps is a fantastic new feature that will help you discover apps in the App Store on your iPhone or iPod touch. Genius for Apps makes recommendations based on apps that you've downloaded. To use Genius for Apps you must have iOS 3.1 or later installed on your device.

Genius for Apps is able to give you great recommendations by periodically sending information about the apps on your device to Apple. This information will only be sent to Apple if you choose to turn on Genius for Apps. This information will be stored with an anonymous Genius ID not linked to your iTunes Account. Apple will also use your App Store purchase history to give you better recommendations. The information about your apps will be anonymously combined with information provided by other Genius for Apps users. Apple will use this combined knowledge to improve Genius for Apps recommendations for everyone.

To enable Genius for Apps on your iPhone or iPod touch:

Tap App Store.
Tap the Featured pane at the bottom of the screen.
Tap the Genius tab near the top of the screen.
Tap Turn on Genius.
You will be asked to agree to the terms and conditions. After you agree, Genius for Apps will be enabled.

If you would like to use Genius for Apps on more than one device, you must turn on Genius for Apps from each. You can turn off Genius for Apps from the Account page in the App Store. To get to the Account page, scroll to the bottom of the App Store screen and tap the button with your account name on it. Once you turn off Genius for Apps, the App Store will no longer send information about the apps on your device to Apple. If you used Genius for Apps on more than one device, you must turn off Genius for Apps from each device.

Another way that enables Genius to work on iPhone.

Refresh your Genius results in iTunes and then re-sync your phone with iTunes. Then you should be able to generate Genius playlists on your phone.

To refresh your Genius results:

Open iTunes
Sync your phone with iTunes so all your purchased music is in your current iTunes library.
Make sure Genius is on. If you select Store from the menu bar and it says "Turn off Genius" you're all set. Otherwise select Store -> Turn on Genius.
Now select Store -> Update Genius
iTunes will think for a while and eventually the status area at the top of the main window will say "Delivering your Genius results… ".

When it's done delivering your Genius results sync your phone with iTunes. You should have Genius playlist capabilities on your phone now.

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