I had gone through some articles on how does Google calculate PR. In a simple term, this is how Google calculate PR of a site (Don't know whether I am correct or not).
Lets say there are three sites X , Y and Z. And Y has PR 2 and X is linking to its PR page and there is another site Z which is linking to the same page. So the PR passed on to X and Z would be calculated as...
X = Y PR/number of links to Y page.
So in this case the PR that would pass on to X and Z would be 1 each looking at the PR of site Y which is 2. Obviously it wouldn't be passing PR 1 to both the sites since there are some other factor which I am currently not taking into account at the moment.
Now Can any one help me on whether the internal links are also counted when calculating the PR or its just the Outbound link.
Secondly I have heard that one should link to high PR sites to get high page rank for themselves. Why is it so when one can get the PR juice even out of sites which has low PR like 1 or 2 and the number of OBL to such sites being very low.
So can somebody suggest me whether its about linking to high PR sites ( where obviously 99% of links will be nofollow and useless since no link juice would pass on) or link to any sites(obviously in same niche) which has low PR but passing on link juice.