I'm doing some competitive intel on a sight that ranks one spot higher that my company's for our number one (moderately competetive) keyword. Their site has very little text for an SE to latch onto, and when I check their backlinks in Google, they're mostly spammy links from off-topic sites (foreign, adult, gambling, etc.) with very few relevant links. Most of these backlinks are redirect pages, and when I check the source on the URLs given in the serps for a "link:" search, I find that the pages are almost universally generated pages (I've read some bad writing in my time, but no human being could right stuff as bad as is on these pages) with no relevant content. And many of them don't even contain a link to our competitor in the source code. But somehow our competitor is getting PR juice from them (their other links are very weak), so I suspect that these pages are cloaked for backlinking purposes. Perhaps they're feeding the engines pages with links, and not showing them what the rest of us see?
What I'm wondering is if anyone has any idea how much juice you can really get from something like this. Intuitively, one would think that it would take a lot of time and effort to pull this off, and that the PR reward from a bunch of zero PR pages isn't really worth it. But has anyone seen this happen? I'm really scratching my head as to why we're being outranked by an inferior site.