This information is stored in jukebox.db in the DATA folder. The Popular list is based on the number of times a file has been played; the play count is written back to the database every time you close the jukebox.
If you edit this file with a text editor, you'll see the records for individual songs. A song record looks like this:
{614313IWIL}{I Will Remember You}{Sarah McLachlan}{Singles}{0}{1145561514}{287}{0}{}{12}{1}{5}
I've highlighted the field that represents the play count. This song has been played 12 times. Each time a song is played, it's playcount (in memory) is incremented and the Popular table re-sorted.
Does this help?
--Chris