There is not a single “bid increment rule.” There are 2 entirely different rules that use the same bid increment table (to make 2 entirely different calculations) that many (including, unfortunately, eBay in the Help Page with the increment table) try to conflate into a single rule and get confused:
1. A new bid must be at least 1 increment higher than the SHOWING "current bid" (NOT the HIDDEN maximum of the current leader) in order to be accepted.
2. The price (a/k/a the "current bid" while the auction is running, which is simply what the price would be if there is no further bid-related activity before the auction ends) will be AT MOST 1 bid increment higher than the underbidder's maximum (unless more is needed to meet the reserve in a reserve auction).
Note that rule 2 establishes a MAXIMUM, not a minimum. As long as the new bid meets the first rule as of the time it is placed, it can be any amount, including 1 cent higher or exactly tied with the hidden maximum of the current leader: if it is 1 cent higher or more, the new bidder takes the lead; if tied or lower the old leader retains the lead.
Example: Starting bid $.99. A bids $.99. B bids $5.00. B's bid shows at a "current bid" of $1.04 (1 bid increment of $.05 over the underbid of $.99) and the minimum for a new bid is $1.29 (1 bid increment of $.25 over the "current bid" of $1.04). C bids:
C's bid amount:..............New current bid:...............comments
$4.00..............................$4.25.................................B retains lead at 1 increment of $.25 over $4.00 underbid
$4.75..............................$5.00.................................B's full bid amount is used up, but nobody else can tell that since it would still show at $5.00 if it were higher
$4.76.............................$5.00.................................Since B's bid is only $5.00, eBay cannot tack on a full increment, so B leads at the full amount of that bid
$4.99..............................$5.00................................Ditto
$5.00..............................$5.00................................B retains the lead since exact ties go to the earlier bid
$5.01..............................$5.01................................C takes the lead by 1 cent since his/her bid is higher than B's and that's the full amount of his/her bid
$5.50..............................$5.50................................Now C's bid is used up but nobody else can tell since it would still show as $5.50 no matter how much higher s/he bid, e.g.:
$6.00..............................$5.50................................eBay only uses enough of C's $6.00 bid as needed to beat the underbid by up to 1 bid increment and hides the full amount. Note that the increment increases to $.50 at $5.00 and the increment for rule 2 is not the same increment as for rule 1 since the amounts the increments are being added to are in different brackets (rule 1 is based on the showing "current bid" before the new bid is placed; rule 2 is based on the maximum bid of the underbidder, whether that is the old leader or the new bidder).
The two bids at the same time for the same amount were probably submitted by mirror snipe service servers, or 2 different servers, or one manual submission and one snipe service (to increase the chances that at least one will get through in time). Usually the later such bid is rejected because the first one caused the minimum bid amount to increase, but if they come close enough together both will go through while the first one is still being processed.
