Kriging and Variograms
The kriging algorithm incorporates four essential details:

When computing the interpolation weights, the algorithm considers the spacing between the point to be interpolated and the data locations. The algorithm considers the interdata spacings as well. This allows for declustering.

When computing the interpolation weights, the algorithm considers the inherent length scale of the data. For example, the topography in Kansas varies much more slowly in space than does the topography in central Colorado. Consider two observed elevations separated by five miles. In Kansas it would be reasonable to assume a linear variation between these two observations, while in the Colorado Rockies such an assumed linear variation would be unrealistic. The algorithm adjusts the interpolation weights accordingly.

When computing the interpolation weights, the algorithm considers the inherent trustworthiness of the data. If the data measurements are exceedingly precise and accurate, the interpolated surface goes through each and every observed value. If the data measurements are suspect, the interpolated surface may not go through an observed value, especially if a particular value is in stark disagreement with neighboring observed values. This is an issue of data repeatability.

Natural phenomena are created by physical processes. Often these physical processes have preferred orientations. For example, at the mouth of a river the coarse material settles out fastest, while the finer material takes longer to settle. Thus, the closer one is to the shoreline the coarser the sediments, while the further from the shoreline the finer the sediments. When computing the interpolation weights, the algorithm incorporates this natural anisotropy. When interpolating at a point, an observation 100 meters away but in a direction parallel to the shoreline is more likely to be similar to the value at the interpolation point than is an equidistant observation in a direction perpendicular to the shoreline.
Items two, three, and four all incorporate something about the underlying process from which the observations were taken. The length scale, data repeatability, and anisotropy are not a function of the data locations. These enter into the Kriging algorithm via the variogram. The length scale is given by the variogram range (or slope), the data repeatability is specified by the nugget effect, and the anisotropy is given by the anisotropy.