You are explaining one component of SEO, which is click-through rate. Google will A/B test certain sites one spot higher or one spot lower to see if click-thru rate is positively affected. So if SiteA gets 80% of clicks while in spot #2, but SiteB gets 84% of clicks while in spot 2, then SiteB moves up to spot #2. The cycle continues as sites move up and down a few spots for fine tuning.

However click-through rate is only one component of SEO. The biggest and most significant component of SEO is backlinks, which are ranked by quantity and quality of the link. So if google trusts SiteA a lot and SiteA links to SiteB, then google starts to trust SiteB. If other trusted sites also link to SiteB then the domain reputation grows for that site. Then there is the same ranking on a per-page basis as well. So if one page in particular is very well-linked to, then Google starts to link that page higher and higher for relevant results. This is the largest and most significant aspect of SEO. The click-through rate is a fine-tuning algorithm once you get to the top, but it alone isn't going to help. Google will never test SiteA with SiteZZZZZZZ on page 12.