Dymero - 1:13 pm on May 31, 2013 (gmt 0)
Here's what I wrote in the Penguin 2.0 topic:
There is, of course, a difference between going overboard on internal links and having a strong internal linking structure. It's also possibly to under do it and get no additional benefit.
I've had pages rank well based on internal links alone.
We do use contextual links, but they are related to the topic at hand. For example, if we're writing about blue widgets, we might link to the red widget page, if it's related to the topic. No over-optimized text. Like Shepherd said, more "red" than "red widgets."
And it works. Pages that are particularly linked strongly throughout the site do tend to rank highly, even in the absence of external links.
Edit: I should probably say that we are pretty well linked otherwise. I'm not sure how strong an effect even an internal linking structure will have without a strong external link profile.