Google has sorted out many ways to assign the importance of a search engine rank on the web. One of them is page rank. It is a number, which represents how has Google ranked the page and how important is that page on the internet. The page rank is decided out of 10. As you descend your value increases in eyes of Google. Suppose that your index page of the website is ranked 5 out of 10, then you can definitely say that it is going good, whereas, page rank of 0, 1, 2 etc are considered bad for a page.

Google also says that when one page links to another page, it is effectively giving a good impression for the other page. The impressions or votes that are cast for a page, shows how important a page is. The basic method of Google how it calculates the page rank is still unknown, but it can be guessed that Google calculates a page's importance from the votes cast for it. page rank is often refereed as PR in short terms. While doing link building for your site, you should be careful not to be linked to many PR 0 sites as it might result in lowering your own PR. This is because you are sharing your PR with them, so obviously your PR has to go down. The first step to calculate the page rank (PR) for a page is to consider its entire inbound links. These inbound links are from within the site and links from outside the site.

Usually we consider the Google PR for statistics but the original PR is a bit different from the Google.
PR(A) = (1-d) + d(PR(t1)/C(t1) + ... + PR(tn)/C(tn))

The terms are “t1-tn” are the pages linking to page A
'C' is the number of outbound links that a page has from it
'd' is a damping factor, and is usually set to 0.85.
A much simpler equation can be
Page “a”‘s PR = 0.15 + 0.85 * (a "share" of the PR of every page that links to it)

Where the "share" = the linking page's PR divided by the number of outbound links on the page.
From this equation we can conclude, one can easily conclude that a link from a page with PR4 and 5 is more better than a link from a page with PR8 and 100 outbound links. The page rank of a page that links to yours is important but the number of links on that page is also important. The more links there are on a page, the less page rank value your page will receive from it.

Therefore, the conclusion is that a link from another site increases our site's PageRank if that site has a good PR itself. Just remember to avoid links from the link farms.

However according to more recent Google updates like the Jagger update, it has come to light that PR includes many factors and gives weight age to issues like content, keywords, Link building, Meta Tags, Title tags, Alt tags page code, design and keyword density