The Massey Ranking Method was devised by Dr Ken Massey and he has developed a web site with most of the American sports results - click here. His method is based Dominance Matrices and a linear system using the score differential as the major component. Although, other factors can be used, such as breaking the season into intervals and weighting each interval differently - perhaps weighting the games leading into the finals/play-offs higher (click here to see the modelling momentum video).
For an explanation of Dominance Matrices -see Joel Speranza explain here or Bell Shaped Education here.
One of the issues with the Massey method is that if there is a "blow out" in score differential this may bias rankings. So some of the software caps the winning margin by a certain number. For example, a "blow out" in basketball may be a winning margin of greater than 20 points, you may cap all winning margins over 20 points as exactly 20 points - see the March Madness software.
Basic overview and application of the Massey Method for Maths Students
The Maths theory behind the Massey Method (video coming)
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