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Huge Mechanical Computers Used To Calculate Horse Racing Odds (hackaday.com)
szczys writes: The Pari-Mutuel system revolutionized how wagers were made on horse races starting in the late 1800s. It moved away from gambling against the house, and adjusted the odds based on how many people were placing wagers on a particular horse. Calculating and publicly displaying the changing odds was slow and labor intensive until engineers took a crack at the problem. They created Tote Boards; large mechanical computers which connected to each betting window with levers and cables. Each pull of a lever recalculated the odds which were displayed on large mechanical displays for all to see. Tote Boards were built all over the world and used until digital computing displaced them.
Two things.
First, 'the house' has no stake in the outcome of the race, and never loses money on a race, so you are never playing with house money.
Second, 'the odds' are not the chances of the horse winning (which would be impossible to calculate), it is the amount of money you get paid if the horse does win. For instance, the amount paid for the 'win' position is determined by taking all of the money bet on the 'win' position (minus the tracks cut), and dividing it among the winning tickets. The odds printed in the program are just a prediction of what the BETTING will look like.
How do you think they calculate the predicted odds, which you use to make your selections? By studying the stats and the like. The fact that you don't lose much using your method shows that studying the stats DOES lead to a better outcome than chance (if you know what you are looking at, of course).