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This have been going on for a while now-- to a lot of sites.
We originally have about 85 backlinks and home page pr is 5, now our backlinks dropped to around 20 and home page pr is 4, and of course, pr of all other pages dropped accordingly too.
Google is doing something that we wish someone can tell us!
What nobody of you mentioned yet is if your traffic / referers from google have also dropped.
My backlinks have been going up and down like a yo-yo, just as some others have described. My site was PR6 a couple of months ago, PR5 last month, and now is PR4.
During the summer, my traffic goes way down. My traffic from other referrers (for example, MSN) has recovered now that the summer is over. My traffic from google has not recovered.
Traffic better than ever. SERP position 2 for primary keywords, up from 3.
The increase in traffic and serp position is exactly the outcome that I would have expected, under the "old regime", for the work I have done on the site.
Under the new order, I get the results that matter, it's just that the PR and backlink reports don't give me warm fuzzy feedback anymore.