How is the relevancy of a linking site determined?

If you own a blog about making money online, you could cover every subject from e-commerce to SEO and being a webmaster to PTC/GPT and everything in between and then some! I mean, honestly, you can cover a vast range of subjects. If you own a site about cars, how far does the relevancy go? Car part stores? Information on cars? Car-related arcade games? Dealership sites? A blog about a guy that drives cars?

So, how exactly does Google determine whether or not a site that links to you is relevant? Perhaps a link is considered relevant as long as it's not insanely unrelated... you know, if you have a blog about elephants and you're getting a link from a store that sells party hats. Does it use your description? Keywords? Content? What actual pieces of information are utilized in making such a decision?

Besides, do you believe it really matters if a linking site is relevant?

Share your thoughts!