We were invited for an interview a few weeks ago. We didn't get in; the feedback we received was that we should get 10 customers, and reapply in the future.
I was always under the impression that YC was an accelerator that funds ideas. We were further along, had a website up with a handful of beta testers and hundreds of early signups. It wasn't enough apparently.
My hypothesis is that it makes sense from YC's perspective to be more selective, and pick companies that are more established. They are in a position to do this, given the ever-increasing number of applicants.. alas, the rationale of every investor is to pick companies that will have the highest expected returns..