Good enough to publish, but only $5 worth of good

I was researching markets for a story today and I ran across the most interesting tidbit in their author's guidelines:

All published authors will receive payments ranging from $5 - $25, which will accompany the contributor's CD copy of the issue, within two weeks of publication (delivery to non-U.S. contributors may require longer than two weeks).
Now, this begged an immediate question for me. I'm fine with paying by the word or line, or by standard payment prices for short stories and poetry. But paying short stories on a sliding scale? I was perplexed. How did they determine how much each story was worth?

The actual amount to be paid will be decided by our editors' ranking of the work.

Ah. So you are, theoretically, going to tell me my story was ranked highly enough to be published by your magazine, but not well enough to be worth $25. No, it's a GOOD story, publishable and all, but only $5 worth of publishable.

Folks, my mind just boggled.

Don't get me wrong, I'm not complaining about anyone willing to pay us short-story authors for our amazing little creations that far too small a segment of society seems willing to acknowledge. But I find this just a little odd.