[DWarrior]

AaronBrown's post is very good, but another reason that might be throwing you off is that people fold hands like K3o, so if early players fold, it doens't mean they remove only small cards, they will also fold Queens, Jacks, Kings, and Aces (although Aces less proportionately at lower limits, but that's an almost insignifficant factor as Aaron pointed out).

So while their hands were "bad" their cards aren't necessarily low. This means that while there will be less cards, the probability of getting higher cards will not necessarily increase.

That's the logic I used (if you can call it that), but my statistics knowledge is only at an AP level (highschool), so I don't know the fancy formula names, just general concepts.

I hope that explanation made sense to you.

2nd EDIT: Aaron: I think that's why the fallacy you mentioned seems true to some people, who consider bad hands to be T4o and don't realize that K5o and such also get folded proportionately, so the probability of latter player not having a playable hand remains the same.