How Google calculates a page's ranking

PageRank is a numeric value that represents how important a page is on the web. Google figures that when one page links to
another page, it is effectively casting a vote for the other page. The more votes that are cast for a page, the more important the page must be. Also, the importance of the page that is casting the vote determines how important the vote
itself is. Google calculates a page's importance from the votes cast for it. How important each vote is is taken into account
when a page's PageRank is calculated.PageRank is Google's way of deciding a page's importance. It matters because it is one
of the factors that determines a page's ranking in the search results. It isn't the only factor that Google uses to rank
pages, but it is an important one.Take a look at the equation below.
PR(A) = (1-d) + d{PR(t1)/C(t1)} + ... + PR(tn)/C(tn))
In the equation 't1 - tn' are pages linking to page A, 'C' is the number of outbound links that a page has and 'd' is a
damping factor, usually set to 0.85.A page "votes" an amount of PageRank onto each page that it links to. The amount of PageRank that it has to vote with is a little less than its own PageRank value (its own value * 0.85). This value is shared equally between all the pages that it links to.Note that when a page votes its PageRank value to other pages, its own PageRank is not reduced by the value that it is voting. The page doing the voting doesn't give away its PageRank and end up with nothing. It isn't a transfer of PageRank. It is simply a vote according to the page's PageRank value. It's like a shareholders meeting where each shareholder votes according to the number of shares held, but the shares themselves aren't
given away

ref:http://www.link-assistant.com/seo-talk/post-1403.html

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