This only started happening when I was about a 3rd of the way through the first prestige level. All of a sudden I'm getting matched with players who are in their 5th, 6th ,7th prestige. When I first entered prestige, I was getting matched with level 40-55 and 1st prestige; now I'm at level 36 of the first prestige and am getting dominated by masters and higher prestige players. What's the deal? How does matching work and what can I do to prevent getting matched with players well above my skill level?
Dependent on the Game-Mode, Prestige levels do not make a difference. CoD creates matches based on the players and not their level - Teams are then 'equally' split to make the game fairer; this is based on prestige and your ratios.
Lobbies are generated at random once you reach a Prestige level and above, thus enhancing gameplay and giving you a more 'realistic' feel...
Adding to @EfcSeany, CoD selects your opponents this way :
So matchmaking does not only select players that are the same level as you.
But, as @EfcSeany said, teams are built to give you the most disputed game. From experience, I would say this works out half the time. I play a lot of kill confirmed, and I'd say most of my games end at 100 to less than 85 confirms. I wouldn't call that a close game, but I've also experienced 100-20 games.
I believe that if you really want to play with people on the same level as you, you should try League Play. In League Play, you're placed into leagues, and winning/losing games make you go up/down in leagues. That way, you'll more probably be matched with players on a similar level as yours:
Just before hitting "post", I found this website, from which the description of "step 5" comes from. It was pretty much what I wrote, but it's more understandable. I don't know the reliability of this link, but the article says exactly what I already had heard of.