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I'm a little hazy about exactly how js effects seo, I only know that it can cause problems (but I think this is only when the link is within a javascript command in the body?).
Thanks
At PubCon Austin last year, I discussed this with Matt Cutts and he acknowledged that it was happening. He said that when Google discovers a URL this way, they add a "virtual link" in their web graph, so it also can pass link juice.
[edited by: tedster at 6:44 pm (utc) on Jan. 14, 2010]
The guidelines that Google published for AJAX [google.com] are worth a read if it looks like you must use a JavaScript menu system. Among other things, those guidelines recommend Jeremy Keith's Hijax approach [domscripting.com] to offer static links that can co-exist with your JavaScript enhancements.
[edited by: tedster at 6:45 pm (utc) on Jan. 14, 2010]
From a search engines point of view, they are not about to start actually executing any old JavaScript on their back end servers. That's a huge security risk.
So the progress has been rather slow in terms of what kinds of JavaScript links will be indexed. The easiest to deal with are where the URL is plainly visible as an uncoded character string. Nothing needs to actually be executed in that case - simple text analysis easily reveals the destination URL.
I am now using less and less JS on newer sites, partly prompted by the SE announcements some time ago and partly by JS exploitability. It's pretty much down to collapsed text and optional form field verification, now. Neither use is compulsory.