This page shows some limitations of DTDs, which the W3C Validator almost exclusively uses for validity checking. Many rules in the HTML specification cannot be expressed in a DTD, so the Validator misses a lot of errors.
Check out the source to see the full whackiness. We have unspecified attributes and horribly wrong attribute values. Just because the validator says it's okay doesn't mean it is.
Also check out the XHTML version.