@All that above mathematics stuff
Performance can make sense and still be broken. The system can't account for everything, and by finding "trends" based on the USERS, it is finding trends based on user perception.
My example here is my sand king. Do I play him differently than other people? Well...I don't really think so. However, let's imagine for a second a world in which most SK players at high MMR do a ton of roaming/ganking and help support. I play more of a hybrid spell carry, on the other hand, and leave supporting to someone like CM. Regardless of how good my SK is and how much I win, the system might still say I'm bad because of some random Y factor that everyone else does that I do not do, something that could honestly be very unrelated to winning (like distance traveled). Of note, this is just an example (and I only used SK because he went from max 5 to about an even 2 when they updated the way it was calculated, by far my biggest change). If part of how they determine a "good" CM is if she buys sentry wards, well, that's not really fair is it? It's no one hero's *job* to do ANYTHING, it's entirely dependent on each game and each team comp. Therefore, just because 90% of the time CM is the support/ward bitch doesn't mean the other 10% of the time she's automatically bad.
Judging performance based off of what is most common is not a good system, imo, and it IS likely what they are doing.
Of note, my SF is still a max 5, though he's the only hero I left now. I'd like to think the "players at your skill level" part is legit and that the system merely thinks I'm a slightly above average page 2 player, it makes me feel like 3-4 bars on heroes is a good thing. Otherwise, I pretty much totally ignore it. If you win it goes up a little bit, if you lose it goes down a little bit. If anything, if you want 5 bars on any hero you just have to play 100 games with it and win more than you lose (it seems to me).
Also, hero flexibility is easily the biggest thing you can do to help yourself get better at this game, and that goes for almost everybody. You don't go blink SF just because you saw Dendi do it, you need to realize what items are good for what games. Is skadi an item I consider core on just about any hero? Not at all, but I still buy it every ten games or so because it is extremely useful in some situations. Some games you really should go mekanism OD, dagon BH, or SY Ursa. What pains me the most is to see people copy the same build game after game after game (agility carry players are typically the worst about this) and lose a game because they couldn't adapt and just change one item in their build. Orchid is probably my favorite item for Ursa and I buy it almost 100% of the time I play him - but I've never seen it on an enemy Ursa in my life. They all just go herp vlads/blink/BKB/heart on autopilot.