What is PR drain?
PR stands for page rank, which is the measure of a page’s link popularity. In the most basic form the more inbound links pointing to a page the higher its link popularity. PR drain is the lost of link popularity from a site due to outbound links (those links that leave a web site). The belief is the more links pointing out of your site the weaker your site becomes overall. This myth has resulted in many webmasters fearing outbound links. Some even hide outbound links from the search engines by embedding them in scripts or by using the do not follow tags in their HTaccess file.
Is PR Drain a Myth?
A recent highly popularized article spoke of PR drain as a SEO myth. The article looked at the quality of the outbound links. It spoke of avoiding link farms and bad neighbourhoods. Link farms are pages with tons of outbound links with little content. Bad neighbourhoods are sites that are on Google’s black lists. Though both of these types of linking are major no-no’s this is not the reason for PR drain. The article missed the point of how PR drain actually works. PR is distributed throughout a web site so the internal links actually transfer PR amongst the pages within a site. The amount of PR transfer to the pages is based on the number of links from the linking page. The more links out to the other pages the less amount of PR each linked page receives. When you link out to external sites you are sending less PR to your internal pages and therefore are weakening them. Since your internal links actually count in determining your main page link popularity, if they are weaken the main page’s benefit from them is weaken. So PR drain does exist.
Should you Avoid Outbound Links?
Though PR drain does exist linking out is not necessarily a bad thing. In fact, linking out can sometimes result in ranking improvements. The search engines seem to give some benefit to sites that link to quality relevant sites. The idea is similar to the idea of hub and authority where both end up ranking well. When linking out, it is important to always balance ongoing links with incoming links so that the site’s overall strength is maintained. If possible try to not only balance the inbound with outbound, but get more inbound links than outbound links so that your PR grows.
Oh if you are trying to think of good SEO or web marketing sites to link to…I think I might know one…hint hint 
