They land batches of aircraft from the respective wake categories, rather than on a first come, first serve basis. That's part of why the holds are so busy - they are used as sorting stacks.
There was a BBC programme run for a week called "Heathrow Live", and they explained it. It was news to me, and it's a clever idea where runways are so limited. The programme was aimed at the public, not professionals, so some of it is a bit noddy, but it's worth trying to find on line as there were a few interesting nuggets like this.
I was based at LGW a decade ago, and landing clearances during peak hours typically consisted of a "Land after" at about 100-150', such is the congestion. The first high speed exit is for turbo-props, and jets are to aim for the second - if a jet tried for the first, the net aircraft would have to go around as the landed slowly trundled on to the second exit. There were a few frequent infringers of this procedure. The same three airlines were also regular abusers of "line up, ready immediate" clearances, causing go-arounds while they waited on their cabins to be secured on the runway.