If you know a lot about a niche, and you have a site in that niche, then it's easy to make a new site about something that has to do with it, since you already know a lot about it.
If you have a few sites in the same niche it would be fairly easy to dominate that niche. You will be able to exchange links with highly related sites and rank well in SE.
Plus you can use multiple sites in the same niche as crossover sites to a different niche. See my post 6 degrees of web separation for details. Google really likes links from related pages. So a site about general dog care can link to a site about dog arthritis which can link to a site about human arthritis etc. etc.
Yes I have seen a few people dominate a niche and make a lot of money with this approach. I am starting to do this with a niche I have and it is looking very very good so far and makes you seem a lot more dominate then you really are which in turn makes people come to your site and helps brand your domain. You do not want your websites to be competitors per say but it is best if you make them somewhat different or supportive of each other and once there PR is high it will also help you with getting your new site up in that niche in the search engines quickly.
eric great article what do you think ,is better to have 1 large site 400 pages (example - site about cars section1 sports car 100 pages section2 Small Car 100 pages section3 van 100 pages section4 cabrio 100 pages all with pics and description or have 4 site(one section one site) then this four site will be in same niche
Both ways can work. I discuss this in some detail in The AdSense Crapshoot. Ultimately it depends on how well you can get traffic to the sites, which is really the key. Sorry, I guess that's a non-answer. But I've seen both methods work. Getting a lot of traffic to one site is hard, getting the same amount of traffic spread across multiple sites is usually easier. But then you have to manage all those sites... pros and cons to both!
because with the few site with the same niche.. have a better chance to get the traffic to your site.. because of low competition.