No one knows for sure how PageRank is currently calculated by Google (except Google itself Smile). Some speculations about the algorithm are made by webmasters all of them are based on the original PageRank published by Google.
In essence, Google interprets a link for page A to page B as a vote by page A for page B. This means that page A is considered important (at least by page B).
The more votes (more links) page A gets the higher its PR will be.
Going into more details
As stated above, the main factor in PR is links (or backlinks as they are called). But no all links weight the same when it comes to PR. So an 'important' page linking to you gives you more PR than a 'less important' one.
There for you should always try to get backlinks from pages that have a high PR. These will benefit your page the most.
Another factor in PR propagation is the number of out-links the 'voting' page have. So a PR4 page with only one out-link on it might give you more weight than a PR5 page with 100 out-links on it.
An typical example here would be the famous milliondollarhomepage. This page is PR7 page with hunderds of out-links therefore its weight is would contribute very little to your page PR.
