This article from the New York Times does a nice job of giving an example of how high-speed trading algorithms can front run markets. It helps to explain why traders who only buy or sell after strength or weakness has been manifested are often the ones buying the high tick or selling the low one.
It seems to me that some of the traders who are most vulnerable to these machinations are very active traders (including prop houses) who frequently bid and offer for stocks. The algorithms are reading the order book ahead of others, which tips the hand of these traders.
Because the high-speed algos are buying and selling quickly as a rule, their effects on the markets longer-term are unclear. A stock may still travel from point A to point B, but the computers will affect the path from A to B. This may help explain why traders I work with who are more selective in their intraday trades and who tend to hold for longer intraday swings on average have been doing better than very active daytraders.
When up to half of all stock market volume consists of these algorithmic trades, one has to wonder about the edge of very active traders. Interestingly, those that are successful may be trading new patterns that have emerged since the onslaught of the high-frequency computers. My hunch is that these new patterns would involve a keen reading of order flow, catching the shift in the bidding/offering and the location (bid/offer) of transactions in real time.