Joel Spolsky gave a similar explanation.

That means, in this horribly simplified universe, that the entire world could consist of 1,000,000 programmers, of whom the worst 199 keep applying for every job and never getting them, but the best 999,801 always get jobs as soon as they apply for one. So every time a job is listed the 199 losers apply, as usual, and one guy from the pool of 999,801 applies, and he gets the job, of course, because he's the best, and now, in this contrived example, every employer thinks they're getting the top 0.5% when they're actually getting the top 99.9801%.

Makes sense.

I'm a programmer, and haven't noticed that many horribly incompetent programmers (which could count as evidence that I'm one myself!).