Sure it does:
1) Keyword density
2) Keywords in the right place on a site
3) Links are weighted more than regular text, and they help describe to engines what's on your site. In particular, if you have a blog, it's key for blogsearch.
On my home pages I link to all my section indexes and my sitemap. On section pages I link to the categories in that section. On category pages I link to the articles in that category. On each article page I link to at least 5 related articles either on that site or one of my other sites.
I also try to put my link exchanges on a related article instead of buried in a Web Links section no one ever reads and try to get the people who link to me to do the same. Eventually almost every page on my sites will have decent page rank, even if I don't have many outside links coming into them.
great strategy, especially for the exchanges. thanks for the tip
PageRank is all about Link Popularity. That isn't to say that internal linking may not factor in a very small amount, but good link popularity = good PR. Anyone that states differently doesn't read quite enough.
