PageRank is a scale in which Google measures the quality and quantity of incoming links pointing to your domain. It is an important factor in how you rank in the search results. Other factors affecting your ranking are the age of the domain, keyword density, etc.
Please search with Google page rank algorithm you will find the basic algo.I read 2 years ago. But i have doubt that google follow only that algo to provide PR. Because i have seen many pages without back link posses a good pr.
Page Rank is the algorithm used by the Google search engine, it is based on the premise, prevalent in the world of academia, that the importance of a research paper can be judged by the number of citations the paper has from other research papers.
There are two ways in which PageRank can affect the position of your page on Google:
•The number of incoming links.
•The number of outgoing links on the page which points at your page.
PageRank is a link analysis algorithm, named after Larry Page, 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. ...