I have a few websites and some of them are high PR and and some are very low. FYI all the websites are hosted in the same server. My question is, if i link them together will i be penalized?
I don't thinks so, pagerank is pagerank, but I wouldn't loop ANY links. if you have higher pr sites pointing to lower it should be fine.
your sites will not be penalized but your link quality will decrease for sites in the same server. This is called C Class Ip Block.
It is not bad but not very usefull. Google not only looks your ips but also looks at domain registrations. If you link them all together, you should make some differences domain registrations. Change admin, contact details of each domain. Try to move domains to other registrars.