Well, I definitely think they inflate them a lot - at least the official ones they publish online. One example would be the AAA offer I got from Lancaster, on the open day I chatted to someone else on the course who'd got in with Bs and Cs, and after receiving my AAA offer on UCAS they sent me a letter saying that if I put them as my firm but then missed my offer they'd still give me the place if I got ABB or something like that. Also, if you look up the average entry tariff online it's much lower than the offer of AAA they supposedly give everyone...
Also, when we went to Bath uni to attend a talk about the course, one of the other students asked why they'd put their entrance requirements up that year to A*AA and they said "because Cambridge is now asking A*AA" - essentially they just wanted to look good and imply that they had good students by having the highest entrance requirements online.