Ok this topic has raised many doubts in my head. We all do internal linking(linking to one page from another of the same domain).
What are the benefits?
Do internal links act the same way as backlinks on third party sites?
Do they pass PR if not nofollowed?
I have seen many PR6 blogs with some posts which are hardly a couple of months old having a PR of 5. Strange isn't it, yet very much true.
Naturally, every page on a site normally has a minimum of 1 link to it from another page on the same site. But it is a tendency and regarded as a good Seo practice to do more internal linking, e.g. links within articles wrapped around keywords targeting other pages on the same domain.
Internal links are not shown as backlinks in G's Webmaster Tools neither are they shown in Yahoo's site-explorer.
My question is, do they actually hold any value?
The greatest value, in my opinion, of internal links is that they allow spiders to "deep crawl" your site. This results in more of your pages getting indexed, as well as giving the search engines a better idea of what your site is really about.
As for PR/nofollow (or "page rank sculpting"), I'm not going to comment on that except to say that there are a couple of videos here that might interest you.
The nofollow tag prevents PageRank from passing. But the pagerank still flows from the nofollow links meaning that the links with the dofollow get less PR.
Matt Cutts has a good explanation here: PageRank sculpting
Forget about seo and robot crawl stuff. In common term language, I always believe having internal links help to reduce bounce rate and offer value added experience to visitors to your site.
Yeah internal linking b etween posts is pretty important as well. I try to link 2-3 times in every post, as you can imagine this can literally 'trap' people if the content is good (and I know it is ;)