How much is the PR of your site? Does that matter?

PageRank is very much at the heart of the ranking algorithm. The PR of the pages linking to you (including your own), that is.

The first step doesn't involve it at all. All pages which contain the keywords searched, or those keywords are used in links to the page, are found in the index.

Then they're scored based on how many times the words occur in the page, where they occur (title and heading versus just normal text, etc), and in what proximity the keywords appear to eachother.

Then the scores are increased by the number of links pointing to them with one or more of the search keywords, weighted by the PageRank of the linking page. That means your pages that link in to the matching page too! This is where your own PR benefits you, although patents from as far as 4 years ago show there is a weighting applied to whether the links are from the same site or even same IP range as the matching page (in other words, links from yourself are worth less than outside links).

Then lots of other little factors add to the scores, like freshness of the content...

Finally the results are returned in order by the scores they've been given by all the factors in the ranking algorithm.

This is a simplistic version, but to say PR doesn't count at all is just not right... without counting links, weighted by something (PR), we'd be back in the days of AltaVista when search results sucked.

Go hit up the patent search at USPTO and start reading Google's applications from the last 5 years. Links are mentioned in nearly every single one of them relating to search. And they acknowledge the importance of link popularity on their blog all the time, although mostly in passing as they talk about filtering out attempts to manipulate your incoming links (like buying them, spamming blogs, autosubmitting to directories aka link farms)...

http://googlewebmastercentral.blogsp...opularity.html

As far as what this means practically... yes PageRank matters, but not really that little icon in the toolbar. Google's spent years, tens of millions of dollars and the top brains in the world making sure they can figure out what links matter and what don't, so that their link-based search engine still works even when everyone's trying to game them. Long term natural link building is what you need for great, stable search positions that'll bring you traffic for years... placed because another site owner genuinely thinks your site is useful to their visitors, placed with their own text (not the same text you submitted to 100 sites), placed within their own content.

And links directly to your content help those pages rank well better than links to your homepage, since the PR gain is indirect... the interior pages only get a fraction of the PR coming in to your home page since it's spread amongst all the links on the page. If someone links directly, it benefits that page during ranking directly.