The initial sort order is "Recent", for items that have been updated recently. You can also sort by votes, category, by name A-Z, by cost highest to lowest, and a few other options. Sorting by "Itinerary" will show the items in the order they've been scheduled in your itinerary, with a separate group at the bottom for any unscheduled items.
You can drag and drop items into the exact order you want by choosing "Custom Order" from the More menu. Custom order only works within a particular category (like Lodging or Dining) -- it's not available when you're viewing everything in the notebook.