I haven't used ebay much so I don't know it very well, but I cannot figure out what it is that I'm missing in this case.
You see, in ebay when you want to place a bid on an item, you don't place a direct bid. You place a "maximum bet" - that's how much you are willing to pay for an item if it comes to a bidding war. The next person to bid however must immediately place an amount larger than your maximum bet - otherwise it doesn't make sense of course because the person instantly loses.
So, say, you see a nice T-shirt that's currently going for $1, which also happens to be the maximum bet for the previous guy. Now I get to choose my own maximum bet which should be at least $1.50. Let's say I bet $5. Ebay will note my maximum bet but will only bid $1.50 for me. So if I win now, I will only have to pay $1.50. But the next bidder will have to place a maximum bet of at least $5.50, or he will instantly lose anyway. Thus ebay doesn't even allow him to enter anything less than $5.50, it's even written there.
So what would prevent me from entering, say, $99,999 as my maximum bet? It's pretty clear that nobody in their right mind would bet more than that for a simple T-shirt. However I won't have to pay more than $1.50, because that's the next step after the current bid.
So... what exactly am I missing here?