For a more detailed description, you can pick up today's copy of the Herald Sun. But since it might be a little too late, I'll tyr my best to give you a summary of how it works:
VTAC scales the study scores depending on how strong the cohort was in a particular subject and how difficult it was to get the middle ranking. Just say that in Methods (CAS), the average study score was 30. But the Methods (CAS) students averaged a study score of 36 in their other subjects. This means that the Methods (CAS) students were stronger in their other subjects and therefore the Methods (CAS) study score (ie. raw score) will be scaled up 6 to make the average ENTER subject score (the scaled score that contributes to the ENTER) for Methods (CAS) at 36.
Similarly, for psychology, the students this year averaged 28 in all their other subjects so the scaling process scaled their study score downwards by 2 so that the average ENTER subject score for psychology is 28.
Subjects are always scaled in the year that they were completed. So if you did LOTE: Chinese SL in 2008, then that subject will be scaled according to last year's cohort.
EDIT: Another important thing to note is that VTAC does the scaling, not VCAA. VCAA is responsible for marking the exams and giving the raw study score. VTAC adjusts it and provides the ENTER subject score and if permissible, finally your ENTER.