Ticket prices are set basically via supply and forecasted demand. The higher the forecasted demand, the higher the price and vice versa. (What follows is a highly simplified explanation of some of what's going on, it really a lot more complicated than this but I think you'll get what you need.)
Now the key here is the forecasted demand, esp. when you are booking a long ways out. Far out from the travel date (starting at about a year), the demand forecast will basically be based on the equivalent date a year ago, adjusted for holidays, day of week, any known special events, general increase in traffic (5% year-over-year, etc.). That means the forecast for the second Monday in March 2008 will be based on the 2nd Monday in March 2007, presuming Easter isn't falling on that week or something (but even then the Easter weekend 2008 forecast will just be based on whatever weekend in 2007 Easter fell on).
As you get closer and closer to the departure date, the forecasted demand will be based more and more on the actual booking patterns they are seeing for the flight, and less on what they were a year ago. If they are seeing more bookings than they expected, then prices will go up. And if demand isn't living up to expectations, they'll lower the prices.
And in one final twist, once you get really close to the flight date, all bets are off. At that point, most people booking will be business travellers willing to pay much higher prices for flights than leisure travellers. The airlines hike rates at that point for this reason. If demand is really low, you might still get lucky and get a deal, but the chances are low.
What does that mean for you? Well, prices far out are what I think of as the equivalent of the "sticker" price on a car. If you wait to book, and demand for the flight turns out to be low, you could get a really great deal-sort of the equivalent of negotiating a price below invoice on a car. On the other hand, if demand for the flight is high, you could get stuck paying a much higher price - think of it as having to pay a huge dealer mark up over the sticker price, just because a car is popular and in demand.
So all of that makes when to book your flights really more about your risk tolerance than anything else. These days, I typically check way out, and if I'm not impressed by the rates I'll watch them like you are doing to see if a great deal pops up. By about 2.5-3 months out, I'll go ahead and book something at whatever price if I still don't have anything because at that point I figure the airline will have a good grasp of what the demand is, and prices will just start going up from wherever they are because of the business traveller factor.
