When you click on Popular, we take your 1,000 most recent items, and rank them by popularity on the Internet. This is a way to sort your recent recent items to see what's getting the most buzz and attention at the moment.
We show Digg Reader's "popularity" ranking on a scale from 1-3 red dots, with 3 being the most popular. To see how this works, click on Popular, and then choose the List view. You'll see your 1,000 most recent items ranked from most to least currently popular out on the Internet.
We use a set of available social signals to make our calculation of "popularity", using social sharing actions as an estimation of overall popularity. As we get more users and more data, we're going to keep refining and improving our algorithms. (We're also going to be rolling out a number of new and useful ways to rank and sort the posts and stories in your feeds.)
If you see fewer than 1,000 items when you click Popular, it simply means that the missing items are not getting shared much, so our algorithms are not able to score them. As you keep using Digg Reader, that issue should disappear fairly soon.