My site is fairly new, and started with a PR3, it just went down to a 2. Is this the sandbox effect I've read about? If so, it SUCKS!
That your toolbar PageRank went from 3 to 2 is of very little relevance. More important is how you're ranking for keywords. Are your rankings going down too?
No, I don't believe so. With that said, I'm wondering if this latest update didn't include the devaluing of certain links? For instance, if you had a given number of PR5 links that pointed to your site and all of a sudden Google devalued those links to a PR3 then the PR that transferred from those links to your site would also be lower. Hmmm.
I recently read that Google says that PR (as shown on the Google bar) is for entertainment purposes only. I can't remember exactly where I read it but it makes sense to me.
That's the entire point. You can't!! Google mantains two versions (or more, perhaps) of the PR. The PR that is used for calculating SERPs is not the same as the PR that is displayed on the toolbar. Evidence for this can be found in the fact that nobody sees big movements when the toolbar PR is updated. Only the guys at Google could tell you what your real PR is. Or, you can wait until the next toolbar update to find out.
PR isn't everything because it depends way too much on backlinks. Some of my competitors have a PR 5 like me for the German version of my site, although my site has way fewer backlinks but it offers fresh content. My two main competitors had like 3 or 4 updates in the same amount of years and Google lists them still #1 and #2 since they are just the oldest websites still around about the topic