I recently watched a competitor buy a domain (this domain had several pages with PR, and several backlinks), he then did a permanent 301 redirect on the domain to his main site.
Over the next week, there was no real activity in the search results until one night the domain jumped from the teens to the top 3 in one night. This is very competitive niche of the web, and I have never seen any website move like this before.
My question: Has anyone had any experience passing "linkjuice" and PR from one domain to another using a 301 redirect? This is the only explanation I can come up with at the moment.
Absolutely yes, 301 rediects from one domain to another usually do pass PR and link juice. Google reps have confirmed it and the evidence is in the SERPs. In my experience it's not always a quick pop, but rather Google often seems to go through an evalution period - possibly for trust purposes.
It's also been confirmed by webmaster experience over the past years - and it seems like the right thing to do. When one business buys another business, they usually get the assets, and not just the name. However, note that Google does check out cross-domain 301 redirects for trust purposes. The link juice pop is not automatic in every case.
I've mentioned to many people how hard it can be to discover 301 redirects when you are researching your competitor's rankings. Many ranking "mysteries" have their roots here.