Isn't spaced repetition buggy?
There is something wrong with how duolingo considers words are in our short/mid/long term memory:
I've got many words I learnt months ago which are considered as 'new' and others considered to only be in my 'short term memory'! The short term memory is in the order of seconds!
I would have expected to find in the short term memory category only words I'd just learned or forgotten (i.e. switched from mid/long term memory to the short one).
Not sure about this part of duolingo, Hey guys are you sure you use proper spaced repetition principles and algorithms? ;)
concerning the information about spaced repetition you can first read the entry in wikipedia (http://en.wikipedia.org/wiki/Spaced_repetition) and, also in wikipedia, the articles about the forgetting curve, active recall and the long/short term memory.
I also recently watched a great video about Learning and Memory from Standford university: http://www.youtube.com/watch?v=a_HfSnQqeyY
And then there are many papers that particularly study the practice and forgetting effects on vocabulary/language learning and that propose some models. http://www.mendeley.com/ is a good place to search them.
As to the algorithms it seems there are two main ones used in web sites or desktop softwares. The first one is the Leitner system used in many flashcards programs (e.g. Pauker). The second one is an algorithm developed by Piotr Wozniak originally for a software called Supermemo. Different flavors of this algorithm are used by softwares like Anki (which I really like and use everyday). Some studies propose other models and algorithms to schedule the revision of words for example. I won't say more about them as I still need to read more and understand them (I work on a pet project also related to learning and spaced repetition). Furthermore I realize I should have listened to my statistics and probability classes years ago to comprehend them!
For your second point I couldn't (and wouldn't dare to:)) say that they are not doing it right. Concerning my comment I realize that it was perhaps a misuse of the terminology in the section 'Vocabulary'. They use 'strength' in the list but then use 'new word/short/mid/long term memory' to explain the rating. I guess strength is self-explanatory and is related to some kind of 'decay' in the long term memory.
Nevertheless, I saw strange behavior like questions that keep coming back in a lesson even if I answer them right the first time or words showing up over and over. I haven't gone further and kept track of how the words I learnt were scheduled (I have enough headaches with my German right now!). I'd really like the duolingo team to communicate more about it but I think and understand it's not their priority right now.
I would say they are not doing it right. I reported this when the feature was introduced, with specific examples.
These included instances comparing words introduced in the same lesson several topics back, one well used and recently repeated showed as "new" for the recent repeat, and "long term" for the older and largely unused one. That is just nonsense.