Miamacs - 2:46 pm on Mar 25, 2007 (gmt 0)

I'd say Google is heading to the exact opposite direction with its algo, but in the meantime, the changes trigger an effect that you describe, because of (forcing) relevant site navigation.

Suppose a site gets a relevant, high quality referral with its key theme to one of its pages. Homepage, subpage, any page. This URL will have scores for a word or phrase that it's supposed to be relevant for.

If the internal navigation is meant to combine or further develop this relevancy, no matter what page the links and visitors land on, both the users and the algo will gladly admit that on a widgets page ( page, not site ) the internal links promote other pages to be of value about the keyword "widgets" even if the anchor of the internal navigation doesn't mention widgets all over again.

Given the source and the target are relevant, and use phrases that are interpreted to be okay to carry on the theme, a site will thus be scoring higher.

The landing page for widgets can pass on further relevance with any words that are recognized by Google as a valid combination / derivation.

And so, the algo works its way through the site page by page, but since the navigation is coherent, the entire site will benefit from it.

With new age "stemming" just making its way through the most wanted factors, sometimes pages will be found by using by derivations as well, even if they don't have a single inbound link nor navigation featuring those in the anchor / OR the content. ( One of these is necessary though. )

For inbound links and navigation, relevancy scores are not just stabbing holes into the scrorekeeping card. It's more like pellets, with a big hole in the middle, and some supplemental scores all around for anything that's related to the theme... some you may already target, and some you may not even know of. And relevancy isn't just semantics anymore, it's data gathered or hand typed into a database of related phrases.

So regarding your question:
I'd say the algo is examining pages, not sites. But a well kept, well researched navigation will turn the tables, and in the end, results in the effect you mentioned.

Include the disclaimer here that while part of this is experience and test results, part of this remains a theory which may be proven false or obsolete at a later time.