It's based on whether the icons are in the C:\Documents and Settings\All Users\Desktop folder or the C:\Documents and Settings\your_user_name\Desktop folder. The two are sorted separately. If there is only one user on the system, simply move all the contents of the user Desktop folder to the All Users\Desktop folder and then, everything will sort from A to Z.

Whether the shortcut is placed into the individual user's Desktop folder or into All Users\Desktop is entirely up to the authors of the program's installation routine and there doesn't seem to be any rhyme or reason as to what they decide. JAWS, for example, always installs into All Users, but many other shortcuts install into the user Desktop folder of the identity that installed the application.

One more fact--when there are shortcuts in both Desktop folders, those that are in All Users are sorted and appear first; then, those that are in your user Desktop folder are sorted and displayed.