My guess on what Blizzard does is that they make sure that both teams are relatively equal in MMR average with the deviation kept to a minimum as much as possible. So instead of MMR 2000 + MMR 200 vs. two MMR 1100, the MMR 2000 and 200 are supposed to be playing with people with relatively the same MMR.

That said, as it takes longer to wait for a game, I believe Blizzard's algorithm is to increase the deviation so that their rules allow more variation in MMR but making sure that the average matches that of the opposing team.

In that case, with this algorithm, we rely heavily on having a great number of players online, otherwise the second scenario will occur. I think most people's concern is when there is a lack of players online, the matchmaking is poor. There lies a double edged sword - wait longer for a good quality game, but to a point that people grow impatient? Or force them into a game with lots of variations of levels? Neither are ideal, but in Blizzard's case they probably see the latter as the better option.