It is also how I can instantly tell if someone knows what they are talking about in SEO, or doesn't have a clue.
The mistake is: thinking that your personal Google rankings viewed in your browser window are the actual SERP rankings that are returned for all search users.
The reason this is a mistake is because your browser cookies contain information about your browsing habits. If they see that you visit a certain website quite often, then Google will start to adjust your personal search results to include that website near the top of rankings when you search for related terms, since they assume that you are very interested in that website.
So for instance, if you have a website focused on the keyword "lose weight fast" and you check your website 20 times a day to make edits or whatever... Google knows that you do this because your browser records your activity. So the Google.com search mechanism will start putting your website in search results any time you search for a keyword related to "lose weight fast" or even just "lose weight".
The reason that this is a problem is that you are seeing a false positive. You are seeing your website rank highly for that keyword when in reality, that is not its actual rank position for anyone else using Google.com to search for that keyword.
I have seen so many noobs make this mistake, it is unbelievable how widespread of a problem it is. They come into forums like this one and say "I rank at #2 for 'lose weight fast' after only 3 weeks of blogging! But why is my traffic only 2 visitors per day?" thinking that they have actually achieved high rankings when they haven't. The only thing they have achieved is visiting their own website so much that their browser cookies tell Google.com to rank that website highly in their personalized search results.
In order to properly measure your SEO results, it is important to view the SERP's from a browser with no cookies saved in it.
You can do this in Google Chrome very easily by opening an Incognito window, which allows you to browse the web without any cookies being saved or used by your browser. This allows you to see the real SERP results and see your real rankings, because Google doesn't have any of your browsing data with which to personalize your SERP's.
Alternatively, in any browser you can just delete all of your browser cookies to get the same effect (only temporarily, until new cookies are created, which is basically instant). But this is more annoying because sometimes it deletes important data like saved passwords or saved login information.
Another similar but unrelated problem is seeing differing results in Google one day after another, or hearing from someone else that they see different results than you do. This often causes confusion to SEO noobs. But the reason for differing results from different people (or even from yourself one day to the next) is because Google has different data centers across the country and sometimes the data centers' rankings are not perfectly in synch with each other. This sometimes leads to people in one part of the country seeing different results than people in another part, since they receive data from a different data center and no matter how technologically advanced that Google is, they cannot update all data centers with enormous amounts of data instantly. So sometimes, not all Google rankings are displayed equally across the country (or even in one spot. Sometimes your request to Google may be sent to one data center in the morning, but another data center in the afternoon, depending on how heavy their server load is).