Alexa gets its rankings data from browsers that have the Alexa toolbar installed. That's a fairly small sampling, as well as a skewed one, as many Web-savvy individuals feel that having the toolbar is akin to having spyware on your system. Because of this, any info you get from Alexa needs to be taken with a grain of salt.
It definitely doesn't measure the true popularity of a site, but can give you some idea if people with the Alexa toolbar installed are visiting your site. I have to admit that I like the comparison feature at the Alexa site where you can stack up a few different URLs in related markets and compare their traffic. I don't put much stock in the actual numbers, but it is very interesting to see how much higher or lower sites are on the chart in comparison to one another.Every now and then when I'm bored, I'll use this feature to compare my forum site to some of the other forum sites in the SEO industry, and it's pretty enlightening! The Alexa user base is only a sample of the Internet population, and sites with relatively low traffic will not be accurately ranked by Alexa due to the statistical limitations of the sample. Alexa's data come from a large sample of several million Alexa Toolbar users; however, this is not large enough to accurately determine the rankings of sites with fewer than roughly 1,000 total monthly visitors. Generally, Traffic Rankings of 100,000+ should be regarded as not reliable because the amount of data we receive is not statistically significant. Conversely, the more traffic a site receives (the closer it gets to the number 1 position), the more reliable its Traffic Ranking becomes.