Happens all the time. There was a late model KDX200 on recently - average bike that was bid up to $2200. I haven't seen one go for over $1600 for about a year now...
People also do it to set a defacto reserve. This is particularly common when the seller expects strong bidding, but it doesn't happen for them.
I've done this in the past... but only once because I learned my lesson.
The ghost bidding to drive the price up fails as often as not, but people are inherently greedy, so they'll keep trying. You get a feel for when you're bidding against a ghost. Best tactic I've discovered is to bail out early, and always bail out at the same point in subsequent auctions. Eventually they'll figure it out...