Ranking Systems: What I've learnt so far
Players start out with an average rating which then increases/decreases based on games they take part in. If they beat someone much more highly ranked then they’d gain a lot of points whereas losing to someone similarly ranked wouldn’t affect their ranking too much.
I came across a version used to rank country football teams. and the algorithm is quite well described in Christopher Allen’s article on competitive ranking systems.
This algorithm therefore introduces the concept of a ratings deviation (RD) to measure uncertainty in a rating. If a player player plays regularly they’d have a low RD and if they don’t it’d be higher. This is then taken into account when assigning points based on games between different players.