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1. Pages displayed in an iframe are independent of the parent page - the content is not "combined" with the parent page in the algorithm, even though it all may appear as one seamless page to the user.
2. Links that change the content of an iframe are easily followed and indexed by search engines - they pass PR, link pop and anchor text influence just like any other link because the only difference is a target attribute.
3. I haven't tested issue this for a year or so, but when I did test, the initial src= attribute for an iframe was NOT passing PR, and was not being regularly followed by spiders. To get the initial iframe page to be indexed properly you needed to have a straight a href link somewhere else that also pointed to the initial page.
This may have changed - certainly all the engines are in a numbers game to some degree and looking for any url they can index. I always thought it was odd that the iframed src attribute document was overlooked so frequently.
4. The big deal -- just as it is with conventionally framed pages -- is that search engines will send traffic directly to your iframed document. Unless you take steps to provide that traffic with a navigational path into to the rest of your site, this may be traffic that does you little if any good.
5. All the above are caveats, but there is one plus I've noticed. Because framed pages are very precisely focused in their topic, are often have low word counts, and tend to have a light burden of navigation links and menus, they seem to be easier to get to rank well -- if you take care of giving that traffic a path into the rest of your site, this can be a good thing.
