We used the folk theory perspective to investigate Internet users’ understanding of algorithms during their Internet use. Empirically, we conducted a mixed-method study. First, we carried out semi-structured in-person interviews with 30 German Internet users. Our analysis of these interviews enabled us to identity five folk theories – economic orientation theory, personal interaction theory, popularity theory, categorization theory, and algorithmic thinking theory. In a second step, we created a standardized survey questionnaire with 19 illustrative statements for these five folk theories, relying on participants’ explanations in the interviews to develop statements that reflected lay users’ ideas as much as possible. Participants (N = 331) were recruited through a commercial online access panel using quota criteria for age, gender, and education level to have a sample representative of the German population. Our survey findings indicate the prevalence of such folk theories among a broader population of Internet users, except for the algorithmic thinking theory, which is likely due to it being based on inaccurate assumptions about algorithms’ capabilities.