How do the "Best", "Popular", and "Top" algorithms work?
"Top" simply calculates the (number of upvotes - number of downvotes) and puts on top the comments that rank the highest this way.
I think "Popular" tries to favor comments that don't have many downvotes or something, I'm not sure.
"Best" apparently works by magic.
Way back in October 2009 Reddit introduced their "Best" comment sorting system. We've just pulled those changes into Less Wrong. The changes affect only comments, not stories.
It's good. It should significantly improve the visibility of good comments posted later in the life of an article. You (yes you) should adopt it. It's the default for new users.
See http://blog.reddit.com/2009/10/reddits-new-comment-sorting-system.html for the details.