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Google uses a sophisticated and proprietary algorithm for ranking Web sites that uses over 100 different criteria in the calculation, each of which is given a specific weighting which can change over time. Because the algorithm can change, specific techniques that used to work well may no longer work as well over time. This is important to remember when your site???s ranking seems to change for no apparent reason. For this reason, optimizing your site should not be considered as a one-time task. You should always try, test, and refine your efforts.


Note: In mid-November 2003, Google introduced a major algorithm change during the so-called ???Florida Update??? that changes the way Google ranks certain websites. At this writing, this new algorithm is still changing, with some of the effects not well understood. It is believed that the methods and practices discussed in this guide are still accurate, so this is more of a heads-up that changes may be coming. For more information, see Appendix D -About the Florida Update???.

With that said, the Google algorithm can be broken down into two major groups of factors:
Keyword (textual) factors. Keyword factors involve how, where and when keywords are used. Meaning how well your website is optimized for your chosen keywords, and if those same keywords appear in links that point to pages on your site. Keyword factors determine page relevance.
Link (PageRank) factors. These include the quantity and quality of links that point to your site. Link factors determine page importance and are strongly related to Google PageRank (PR).
Very simply put, Google finds pages in its index that are both relevant and important to a search for a particular term or phrase, and then lists them in descending order on a search results page.
Keyword Factors and Page Relevance.
Keywords are intrinsically related to search terms -those words and phrases that people enter into a search engine to find specific information. Most people enter 2 to 5-word phrases in Google to find what they are looking for. Google in turn analyzes all pages in its index and lists the pages which contain those search terms. Each website visually contains one or two keywords that are repeated more often than others throughout the site. These keywords dictate the ???theme??? of a website, and wil be discussed later on.
How well you can define the theme of your site, and how well you can optimize the use of keywords that comprise the theme of your site, will greatly influence your ranking with Google.
Google determines the most relevant web pages based on a hypertext search and analysis of your site AND of other sites that contain links to your site. Specifically, Google looks to see if the text of a link (the clickable portion) that points to your site, the title of the linking page, and other content on the linking page, also contain your keywords.

Note: When Internet marketers speak of optimizing a site for a search engine, they are usually talking about improving those aspects and elements of your website that will improve page relevance.

Link Factors (PageRank) and Page Importance
Page importance is all about links - their quantity, quality, and strength, which we will discuss later on. This part of the algorithm is also called the Google PageRank (PR).
Google looks for links that point to your site from other websites. Google believes a link from website A to website В is a ???vote??? for the importance of website B. In this way, other websites add votes for your website, which in turn helps increase a pages PageRank value on your site. Each page on your site has a PR value. Usually the PR value is the highest for the home page as most people will link to your home page rather than another page on your site.
The more web pages that link to your site, the more important Google thinks your site is and hence the higher your PageRank value can be. Moreover, it is the quality, as well as the quantity, of links that matter - not all links are valued the same. However, keep in mind that PageRank is but a single (albeit important) factor used in ranking. Sites that are highly optimized for particular keywords can outrank sites that are less optimized but have higher PageRank values.
PageRank value is assigned after comparing every page on every site in the Google index against one another. This is over 3.3 billion web pages! Note that PageRank does NOT factor in keywords or phrases used on your site.

Note: When Internet marketers speak of increasing your link popularity, they are generally talking about increasing the quantity and quality of links to your site, generally through a reciprocal link exchange effort.

bizwiz

Great info you have there. A very good read for people who are just starting out.

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anantshri

seems to be inspired by wikipedia article, and this is definately informative for both new comers as well as vetran's to brush up their funda's.

well with PR update going on this article will help a lot of person's understand the underlying working of and its ranking system.


Note : Reps added for this article.

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sekuchi

Thanks for the news dude....

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weblord

thanks for the headsup and news

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Syngenetic

Thanks for the good article. Guess no need to download the ebooks. -_-

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Neusha G.

Thanks for sharing bud;)

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htnho

Thanks for useful article. REp+

Anish

thanks for the article. You have solved my doubt regarding Google's Ranking.

Hafsoh

Nice Article, Thanks for sharing