You also had some of the columns mis-aligned, and some numbers were misplaced.

Anyway.....

Strangely enough, I'm familiar with James' "Pythagorean Theorem", I just didn't realize that's what it was or that ESPN gave it any credence.

Basically, your (or ESPN's) explanation is pretty much it.

When he first developed the formula and tested it over hundreds of teams across dozens of seasons, it was amazing how close teams came to their actual W-L records after applying the formula to their runs scored and runs allowed.

The Yankees here are a great example, though, of the formula not working.

Because of all of their lopsided wins in which they scored bunches of unnecessary runs, and close losses in which some of those unnecessary runs scored in the wins might have averted some of the losses had they been scored in different games, their projected W-L record, had their runs been normally distributed, works out to be better than their actual W-L record.