What is the definition of 'link authority?'
Link authority is a legacy term for PR. The PR push provided by links is determined by Google's PR algorithm. The mathematical value, or authority of one link from any given page is dependent on 2 factors: the number of active links passing PR and the PR of the page. PR sculpting is a strategy that uses the rules that govern this model to intentionally push PR to important pages of a site. Google disabled the ability to sculpt in late 2007.
So you can calculate a value for link authority?
This would be the PR value, and there are mathematical models that resolve to certain values after numerous iterations - so yes, but it's tedious. We could do better if Google gave us the accurate information. While the basic link authority model has been confirmed by Google's representatives to be true, our tests show that the data shown is either old, or inaccurate. For example if the PR value is displayed as integers, but is rounded from a more precise value, tests might fail if these values are scrutinized too tightly.
How do you test for adherence to this link authority model?
We tested with 3 domains each with PR3, using a target term 'xeeneexee' and on a separate page named 'xeeneexee.html' associated with each domain. One domain had 8 links, 1 pointing to our target, another had 11 links, one pointing to the target, and a third had 40 links, one pointing to target. You can see the results by doing a search for 'xeeneexee' in Google. Read the source code of the homepages to see the experiment specifics.
This test revealed that Google stopped permitting sites that used nofollow from aggregating PR to specific pages over a year before they announced it in May 2009.
What is the real world significance of the link authorityPR model?
(July 2009 Update) Replacement strategy for nofollow
It is the acknowledged backbone, which in combination with semantic relevance is used by Google to determine rank.
(legacy strategy) It is a strong argument for the implementation of the nofollow attribute on all links pointing to non-target pages (about us, contact us, policies, all off site links, etc.), and for a general reduction in homepage link numbers.