This is correct, and the equations in the movie were very much real. I thought it was funnily obvious when he called it "The algorithm for rating chess players", knowing what ELO was.

Here's "The Algorithm": http://imgur.com/e5myT

EDIT: In the intrest in contribution to discussion, two other methods for ranking are the Colley matrix from the BCS (http://www.colleyrankings.com/method.html) and I have used PageRank for a similar purpose before (http://michaelnielsen.org/blog/lectures-on-the-google-techno...).