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Now ... domain1.com is actually moving up the rankings even though it's linking out to sites that arn't linking back!
I get the feeling that if you link out to on-topic websites, it can help you.
I only ever link to related sites now, as I really do think its vital.
Steve
1) I agree with the comments herein regarding G value of external links.
2) I totally disagree with the logic behind. The thinking is way too linear for the real world. There are great reasons to link to sites that are not strictly on-topic as Hilltop would see it or are totally off-topic. G doesn't see it this way as far as I can tell. It is what it is as they say, but I think the logic is false.
It's similar to anchor text in your incoming links from other sites making you rank higher for the keyword in the anchor text.
It works the same way with outgoing links from your page to external sites.
I have tried this and it works great weather you link to an on topic site or off topic site. I don't think it matters if the site is on topic. Google may change this in the long run but for now it's not so.
Of course it helps your visitors more if you link to on topic sites but it doesn't matter to google.
Also google seems to rank sites with h2 tags higher than ones with h1 tags now. They probably did this to fool SEO's for a while until they catch on. It's a pretty sneaky but smart idea! This could be why some of our SEO'd sites are ranking somewhat poorly (especially new sites with low PR) in google for a while now.
Maybe the sandbox is simply from bad SEO so to speak. Since google changed how they rank sites, maybe our SEO'd sites don't rank well because the game has changed? Google is trying to be different?