Like Joanna, I have reservations about #1. However, another factor that is almost too obvious to mention is race and more specifically the intersection of race and drug crimes (which account for the majority of the increase in incarceration rates over the last two decades). Since blacks and Latinos are overwhelmingly poor, the fact that they are also disproportionately incarcerated means that the poor are overrepresented in prison.
Most people are familiar with the differences in sentencing between crack cocaine and powder cocaine: crack cocaine, which is much more common among blacks and the poor, is punished much more harshly than powder cocaine, which is more of a chic, middle-class drug these days. This, coupled with the rise of mandatory minimum sentencing for drug offenses, has put a huge number of poor people behind bars.
However, there's also an enforcement issue that is more subtle and less widely discussed: the drug economy in poor inner cities is usually structured around the dealer on the local corner (and the gangs who compete for this turf). Dealers are known, and deals happen out in the open. Among middle class suburbanites, on the other hand, drug deals often take place within closed social networks and behind closed doors. Combined with a higher police density in so-called "dangerous" neighborhoods, the result is that inner city residents are far more likely to be caught with drugs than are their middle class counterparts. So while selective prosecution is also a huge problem (as someone else mentioned), the problem runs deeper than that.
A good progressive site with a lot of links to data and other articles on these issues is: <www.prisonsucks.com>
And for Chris Doss, who asked about US vs. Russian incarceration rates, here's a quick breakdown of those numbers as well as a number of other countries: <http://www.prisonpolicy.org/prisonindex/globalincarceration.shtml>
Cheers, Dan