All About Link Popularity and PageRank
Retaining Link Popularity
Any link leading away from your site can indeed lower your PageRank indirectly. Since internal links within your site do count if you have to divide the weight of one of your pages between internal links and external links then of course the internal ones will carry less weight than if the external links weren't there. So in addition to getting link popularity it is also important to keep that popularity within your site.
There are a few ways to do this, one easy and often taken for granted method is simply to include a large amount of internal links on every page. If you include a menu of 20 or so internal links on every page then a single external link on one of those pages will take little overall rank away from the internal links.
If it is not possible to vastly outnumber the external links with internal ones then there are other methods you can use to increase the amount of rank retained in your site. You could group all of your outbound links in a single link page, which is a very popular practice. However be sure you don't put a link to the link page on every page of your site, as many do. Instead provide a link to your link page in one location, such as the bottom of your home page. You really want to limit the amount of rank you give your link page because nearly all of it will be given away instead of being recycled back through your site.
Another thing you can do is make your links in javascript or with forms. Since spiders do not read javascript or forms by making such links you should effectively stop the flow of page rank away from your site. Now using this method is fine for instances where it is not involved in a link exchange, however when you're doing this in a link exchange it presents an ethical dilemma. If someone enters into a link exchange with you for the purpose of increasing link popularity then such linking methods might be upsetting to them. In contrast if the person doesn't know what link popularity is and really just wants to get the raw visitors you will send them then they may not mind the javascript links. My advice is simply to not misrepresent yourself. If you're straight forward with everything, including showing them an example link, then your ethics are intact. If they object to the use of javascript you can always choose to not link to them or provide them with a standard HTML link. Of course, with affiliate program links or any outbound links you don't have an agreement about, you should use these techniques to help maintain link popularity. These methods, due to my water analogy below, are known as "plugging holes." Which is another concept coined by yours truly.
Nofollow
A new method of telling search engines not to follow links is called "nofollow" or "rel=nofollow" simply add it to the middle of your link code, such as in <a href = "http://www.example.com" rel = "nofollow">Example</a>l; and search engines will not count the link.Another issue is that you may have pages on your site that search engines don't need to see, yet that you must link to. The solution in this case is to block those pages from being indexed with a robots.txt file or with the robots meta tag. For instance if you offer public profiles of your registered users and have 1000 users then that's 1000 pages that are sucking down PageRank that could be given to your articles. This is especially important with forums that often have dozens of different page types that search engines do not need to see.
When dealing with link popularity I find it easy to think of it like a bucket of water with incoming links being water poured in and outgoing links being water poured out. You need to be mindful of where you want the water to flow when managing your site. You can also use your own site to "launder" the link popularity gained from other sites. For instance if you don't have keywords in your name or domain, and most of your incoming links do not contain your keywords, you can still get a benefit from this incoming links. Since those links do not have your keywords in them they won't help you get ranked higher on the search engines, however they still contribute to the overall weight of the page in question. If that page then links to another page on your site, using keywords, then you will have turned this out-of-context weight into context-specific weight. This is one reason why it is very important to use keywords and text links for all your internal site navigation, especially for links to and from your homepage.
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