I still hear some SEOs saying that linking out is a bad thing because it “leaks” PageRank. They’re probably not idiots (probably), but they’re a little bit misguided.
PageRank works in a similar way to academic citation. A paper that is cited in multiple related papers is deemed to be a trusted source and is an authority in that area. This makes perfect sense. If a scientific paper demonstrates a set of results which are solid and reproducible, then it follows that it is clearly based on solid research and valid experimentation. It is valid and trustworthy, and can be used as the basis for further study.
This means that the more places that link to a website as a source of information, the more authoritative that site is seen to be.
In addition to the number of places where a particular paper is cited, it is also important that the paper uses quality sources to back up the argument. With this in mind, the credibility of a particular website can also be judged based on its foundations. Again, this makes sense from a validity perspective. If the sources of a piece of research are invalid, then it follows that this paper is also invalid.
Value then can be calculated based on the sources that are cited, and by extension, a website that links out to authority sites can be seen as having more validity than a website without tangible sources.
A paper that is frequently cited as an authoritative source by related papers and which also cites credible sources itself is considered more valuable than a paper where the sources are questionable.
Here’s a quick Venn to illustrate the point:
If you want to see this in action, consider the Google search results for the term “Google”. The top ranking non Google page is the Wikipedia article about Google. Not only is this linked to from around 22,000 pages according to Yahoo, it has 234 outbound links to original sources that back up the content and provide credibility to the content.