[juangrande]

Just to elaborate on what Cupid said: the increment is based on the "current bid" (which used to be called "current price" and IMHO still should be). The "current bid" is either the starting bid or the second-highest bid plus one bid increment at that point in time.

Since you won the auction for $126.89, when your competitor bid $126.85, the second-highest bid was no more than $126.89 - $2.50 = $124.39 (and was probably much lower); otherwise, eBay would not have accepted your bid. So yes, the current bid showing when Gixen entered your bid had to be $126.89 or less. But that's what you said in your original post.