Here's a video from Matt Cutts, the head of Google's web spam team. If you want to know Google's position on various SEO methods, this is the guy to turn to. Here's a video where Matt gives us some insight into "PageRank sculpting," a fancy term for selectively linking to various pages on your own site in order to direct the PageRank in the most desired locations. You can find Matt's blog at http://www.mattcutts.com/blog/.
And here's a transcript in case YouTube moves the video or you can't view it for some reason.
PageRank Sculpting / Internal Linking Video Transcript
Video Title: What are your views on PageRank sculpting?
Run Time: 1:48
"Rand, in Brighton, and that might be Rand Fishkind I don't know asks, "What are your views on 'PageRank sculpting? Useful and recommended if implemented right, or unethical?'"
Well I wouldn't say that it's unethical because it's stuff on your website, you're allowed to control how the PageRank flows around within your site.
I would say that it's not the first thing that I would work on. I would work on getting more links, having higher quality content, those are always the sorts of things that you want to do first.
But then if you have a certain budget amount of PageRank, you certainly can sculpt your PageRank. I wouldn't necessarily do it with the no-follow tag, although you can put a no-follow on a log in page or something that's customized where a robot will never log in for example. But a better, more effective form of PageRank sculpting is choosing, for example, which things to link to from your homepage.
So imagine for that you've got two different pages, you've got one product that earns you a lot of money every time someone buys, and you've got another product where you make, you know, 10 cents. You probably want to highlight this page, you want to make sure it gets enough PageRank that it can rank well. So this is more likely a page that you want to link to from your homepage.
So, when people talk about PageRank sculpting they tend to think no-follow and all that sort of stuff, but in some sense, the ways that you choose to create your site, your site architecture, and how you link between your pages is a type of PageRank sculpting. So it's certainly not unethical to have all the links come in your site and then you decide how to link within your site and how to make the pages within your site. Um…I do think that having more links because you have great content is a better way to rank well because it's a second-order effect to be sculpting your PageRank. Um, it can be useful, but it wouldn't be the first thing that I would do."