The STEAM recommendations largely use the TAGs that the games receive, both from the STEAM itself and from the community. It is not uncommon for you to receive completely unrelated game recommendations. If you don't like it, the ideal thing is for you to do is to use the blocking option of certain TAGs that it offers, this prevents you from seeing too much garbage. Otherwise:
"Oh, you played ATOM? This game has an "RPG" tag. I also see that you played Gothic 1, which has the "Open World" tag. I see, DOOM 2? You certainly like "first-person" games. I know! You're wanting to buy some BORDERLANDS 3!"
Yeah, Steam recommendations suck. Totally unworthy of such a big company as Valve in the current year. They should totally use a vector-based model. Users should be able to rate games 1-5, then you compute the distance between users' rating-vectors and extrapolate scores of unrated games from rating-vectors of your closest neighbours. This would also introduce a natural black-box notion of genre, as well as a cool friend-finding feature.