Policing implementations in Cisco IOS are a bit confusing: IOS supports three different algorithms that are configured with very similar parameters of the police command in modular QoS CLI. There's also the older rate-limit command that uses a limited implementation of one of the three algorithms. You'll find all policing details, including the graphic representations of all three algorithms in the QoS Policing in Cisco IOS article in CT3 wiki.
Ivan Pepelnjak, CCIE#1354, is the chief technology advisor for NIL Data Communications. He has been designing and implementing large-scale data communications networks as well as teaching and writing books about advanced technologies since 1990. See his full profile, contact him or follow @ioshints on Twitter.