SDR and Rustico answered the question. I just wanted to add that the Internet probably had a hand in popularizing this method.

An exaggerated example (or is it?) would be that if you price your home at $600k and I’m searching realtor.com or ziprealty.com for homes priced under $300k, your home won’t show up in the result set. But if you price it in a range between $299k and $600k, it will show up.

A naive buyer would think, “Oh look! I’ll probably have to offer them something a little over my price range, but we can probably strike a deal at around $350k. It’s a little above my ideal price range, bit I can manage it.”