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I run serveral websites on one server. All of them offer widgets, with one main "allwidgets" and others are subcategories "redwidgets", "bluewidgets", et..
Total is 8 categories, all sites are hosted in one IP.
Each site is (was) crosslinked to another.
After the recent link update traffic went down 80%. The PR is still showing on all sites but they are nowhere to be found on google SE results.
Did I get penalized by Google algorithm? If yes, what would be the penalty for?
Should I only link from main site to subcategories sites?
Also the sites have significant amount of outbound links (thousands - per each product) and not so many incoming. PR is fine. Could Google penalize for many outbound links?
DG
Google are tweaking their algo all the time. A change that may look as a penalty for some kinds of pages very often just is a shifting of weight in the algo so that some factors count less and others count more.
Some of my own pages recently made a drop (typically from #5 to #15) and I interpret this as just a change in the algo so that some of the qualities of my websites do not longer give me the benefits that they used to. And interlinking does indeed seem to be one of them.
Linking for the sake of boosting a page is in my opinion a dangerous practice. It might be a good idea for you to carefully check all links on your websites and consider if they are useful for human visitors. I believe that this is the ultimate test for the validity of a link, and I believe that Google are trying to make their algo best possibly suited for checking this.
Having many outbound links should not be any problem if those links point to good and relevant pages.
I would give each site it's own IP though, reduces the chance that Google will mark it as spamming.
and ofcourse, get more inbound links.
You can keep linking between those site's as they are all related. Do make sure they all got enough content of their own!