I love this game, but can someone explain matchmaking?

This isn't a flame I would just like to know how it works. Am I right in thinking it is completely random? I am 1v1 bronze, low bronze but I still seem to get paired but with people who are crazy good and a lot higher than me. I also have noticed that if you play in a premade you will still get paired against randoms. All seems a little unfair and slightly broken, as time goes on and you play more games does this level out and put you against fair competition?