The TrueSkill ranking system is a skill based ranking system for Xbox Live developed at Microsoft Research. The purpose of a ranking system is to both identify and track the skills of gamers in a game (mode) in order to be able to match them into competitive matches. The TrueSkill ranking system only uses the final standings of all teams in a game in order to update the skill estimates (ranks) of all gamers playing in this game. Ranking systems have been proposed for many sports but possibly the most prominent ranking system in use today is ELO.

Ranking Players

So, what is so special about the TrueSkill ranking system? In short, the biggest difference to other ranking systems is that in the TrueSkill ranking system skill is characterised by two numbers:

• The average skill of the gamer (μ in the picture).
• The degree of uncertainty in the gamer's skill (σ in the picture).

The ranking system maintains a belief in every gamer's skill using these two numbers. If the uncertainty is still high, the ranking system does not yet know exactly the skill of the gamer. In contrast, if the uncertainty is small, the ranking system has a strong belief that the skill of the gamer is close to the average skill.

On the right hand side, a belief curve of the TrueSkill ranking system is drawn. For example, the green area is the belief of the TrueSkill ranking system that the gamer has a skill between level 15 and 20.

Maintaining an uncertainty allows the system to make big changes to the skill estimates early on but small changes after a series of consistent games has been played. As a result, the TrueSkill ranking system can identify the skills of individual gamers from a very small number of games. The following table gives an idea of the average number of games per gamer that the system ideally needs to identify the skill level:

 

Game Mode	Number of Games per Gamer
16 Players Free-For-All	3
8 Players Free-For-All	3
4 Players Free-For-All	5
2 Players Free-For-All	12
4 Teams/2 Players Per Team	10
4 Teams/4 Players Per Team	20
2 Teams/4 Players Per Team	46
2 Teams/8 Players Per Team	91

The actual number of games per gamer can be up to three times higher depending on several factors such as the variation of the performance per game, the availability of well-matched opponents, the chance of a draw, etc. If you want to learn more about how these numbers are calculated and how the TrueSkill ranking system identifies players' skills, please read the Detailed Description of the TrueSkill™Ranking Algorithm or find out in the Frequently Asked Questions.

Matching Players

If you play a ranked game on Xbox Live, the TrueSkill ranking system will compare your individual skill (the numbers μ and σ) with the skills of all the game hosts for that game mode on Xbox Live and automatically match you with players with skill similar to your own. But how can this be done when every player's skill is represented by two numbers? The trick is to use the (hypothetical) chance of drawing with someone else: If you are likely to draw with another player then that player is a good match for you! Sounds simple? It is!

Microsoft was so impressed by Halo 2's matchmaking and party system that they made it the bread and butter of XBox Live online play and socialization, by placing it squarely into the backbone of Live.

TrueSkill is a system that attempts to enhance one's online experience by placing you(and your party) into matches against opponents(and other parties) of comparable skill.  This system is available for all developers to take advantage.  Bungie uses TrueSkill for Halo 3 matchmaking. 

Matchmaking and TrueSkill is the main reasons I enjoy P2P online play.  I really do not care for games where players can jump in and out of matches while they are going on.  It makes it lose all sense of accomplishment when you beat the other team.  Sure there are times when players drop out, but I find these occasions to be rare.  Lobbies give you a chance to meet your next opponents and you can be sure that the exact same people will be there when the match is over.  Team vs team.

There is some very detailed information on how the system works at the site I linked to.  If you are into statistics(I am not), there is a lot to dig into.