What is PageRank? and "nofollow"

PageRank is a link analysis algorithm, named after Larry Page and used by the Google Internet search engine, that assigns a numerical weighting to each element of a hyperlinked set of documents, such as the World Wide Web, with the purpose of "measuring" its relative importance within the set. The algorithm may be applied to any collection of entities with reciprocal quotations and references. The numerical weight that it assigns to any given element E is referred to as the PageRank of E and denoted by PR(E).
The name "PageRank" is a trademark of Google, and the PageRank process has been patented (U.S. Patent 6,285,999). However, the patent is assigned to Stanford University and not to Google. Google has exclusive license rights on the patent from Stanford University. The university received 1.8 million shares of Google in exchange for use of the patent; the shares were sold in 2005 for $336 million.

Mathematical PageRanks (out of 100) for a simple network (PageRanks reported by Google are rescaled logarithmically). Page C has a higher PageRank than Page E, even though it has fewer links to it; the link it has is of a much higher value. A web surfer who chooses a random link on every page (but with 15% likelihood jumps to a random page on the whole web) is going to be on Page E for 8.1% of the time. (The 15% likelihood of jumping to an arbitrary page corresponds to a damping factor of 85%.) Without damping, all web surfers would eventually end up on Pages A, B, or C, and all other pages would have PageRank zero. Page A is assumed to link to all pages in the web, because it has no outgoing links.
Google describes PageRank:
" PageRank reflects our view of the importance of web pages by considering more than 500 million variables and 2 billion terms. Pages that we believe are important pages receive a higher PageRank and are more likely to appear at the top of the search results. PageRank also considers the importance of each page that casts a vote, as votes from some pages are considered to have greater value, thus giving the linked page greater value. We have always taken a pragmatic approach to help improve search quality and create useful products, and our technology uses the collective intelligence of the web to determine a page's importance. "

Google's rel="nofollow" option:

In early 2005, Google implemented a new value, "nofollow" for the "rel" attribute of HTML link and anchor elements, so that website developers and bloggers can make links that Google will not consider for the purposes of PageRank—they are links that no longer constitute a "vote" in the PageRank system. The nofollow relationship was added in an attempt to help combat spamdexing.
As an example, people could previously create many message-board posts with links to their website to artificially inflate their PageRank. With the nofollow value, message-board administrators can modify their code to automatically insert "rel='nofollow'" to all hyperlinks in posts, thus preventing PageRank from being affected by those particular posts. This method of avoidance, however, also has various drawbacks, such as reducing the link value of legitimate comments. (See: Spam in blogs#nofollow)
In an effort to manually control the flow of PageRank among pages within a website, many webmasters practice what is known as PageRank Sculpting- which is the act of strategically placing the nofollow attribute on certain internal links of a website in order to funnel PageRank towards those pages the webmaster deemed most important. This tactic has been used since the inception of the nofollow attribute, but may no longer be effective since Google announced that blocking PageRank transfer with nofollow does not redirect that PageRank to other links.

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