Yeah this question comes up quite a bit. It's not completely clear how schools use this information. Our sources say that the school is looking to see if you're all over the map or whether you actually have some logic behind to whom you've applied. The best way to get past the potential of getting dinged for applying to a "better school" is by establishing a tremenous amount of fit with that school. In other words, by the end of your app they should be thinking "hey this is the best place for this applicant and it doesn't matter if School X has a higher ranking, it sounds like they truly want to come here."