As already stated, the mileage figures VW publishes are created by the EPA. The EPA runs the vehicle on a chassis dyno under a specific proceedure designed to simulate real-world conditions. At the end of the test proceedure, the fuel used is calculated, and the official figures are created.

At least that's how it used to be. The EPA came to realize that the figures they came up with were far higher than consumers could expect in real-world driving. So for the 1985 model year, the EPA took all of its figures and reduced them. City mileage was cut around 8% and highway about 13% (I don't remember the exact figures). The EPA test proceedure remained the same, only the results of the test were reduced.

What all this means is that you can't fairly compare EPA mileage figures for vehicles built before the 1985 model year with those of 1985 and newer. Identical 1984 and 1985 models had different EPA mileage figures.

The same theme governs manufacturer published horsepower ratings. Before 1972 cars were rated in SAE (Society of Automotive Engineers) gross figures. With the SAE gross proceedure cars were rated without any accessories such as A/C, power steering pump, etc. connected. Also the air cleaner was frequently left off in addition to much of the exhaust. The horsepower figures were genuine, just not in the real world. 

Today we use SAE net figures which rate the engines as they would be installed in a car. They still aren't real world, because factory figures aren't measured at the wheels of the vehicle, but rather at the flywheel. Therefore, any horsepower consumed by the transmission, differential, axles, brake drag, etc. isn't accounted for.

So the next time someone claims that their 60's muscle car came with way more power than your modern sports car, you can tell them that the figures just don't compare. If they did, that old leviathan wouldn't be quite as impressive.

-Alex