PageRank (PR) refers to both the concept and the Google system used
for ranking the importance of pages on the web. The “PageRank” of a
site refers to its importance or value on the web in relation to the
rest of the sites that have been “PageRank”ed.

The algorithm basically works like a popularity contest – if your site
is linked to by popular websites, then your site is considered more
popular. However, the PR doesn't just apply to the website as a whole
– different pages within a website get given different PRs dependent
on a number of factors:

* Inbound links (backlinks) – how many pages (other than the ones on your website) link to this particular page

* Outbound links (forward links) – how many external pages the particular page links to

* Dangling links – how many pages with no external links are linked to from a particular page

* Deep links – how many links that are not the home page are linked to from a particular page

PR tries to emulate a “random surfer”. The algorithm includes a
dampening factor, which is the probability that a random surfer will
get bored and go and visit a new page - by default, this is 0.85. A
variation on this is the “intentional surfer”, where the importance of
a page is based on the actual visits to sites by users. This method is
used in the Google Toolbar, which reports back actual site visits to
Google.