They use supply/demand algorithms. If lots of people are looking at it, the price goes up. Through cookies they’ll be tracking what you’re looking for as well so if you keep returning to a flight or keep trying alternatives for the same destination (let’s say you want to go to the Algarve and you’re searching (eg) Liverpool, Manchester, East Midlands all to Faro), it’ll very quickly work out your destination and start subtly increasing the prices too.
I sorted a flight to Malaga a while ago, searching various departure airports and flight times, then going back to the place I was staying at to look at airport pickup times and so on. When I went to book, I knew what flights I wanted, cleared out the cache, all the cookies, logged in and went direct to that flight and it was £40 return cheaper than it had been the previous day when I was still searching.
Similarly, on just-released flights or on poor sellers, it’ll drop the price.
One tip with EasyJet is to book the Flexi Fare. It’s more expensive than the basic fare (although it varies as to how much more) but, 24hrs after booking, you can change the date by up to a week. So if you want to fly out on Friday but flights are expensive, book the much cheaper Tuesday departure flexifare, wait 24hrs then change the booking to Friday.