If my site's link is converted to a short URL like Bit.ly, Will it still count as a back link or not?
No it wont. Shortened urls cannot pass pagerank and so it will not count as backlink as I think google doesnt read beyond the shortened url (it sees only the bitly part, doesnt actually verify what is the destination url of that bitly link etc.)
It would not be surely count as a backlink because it's hard to crawl those kind of backlink that is been shortened. Spiders can't read them well.
I'm glad I visited here today - Kinda makes it worthwhile sticking a URL shortening service on a website if all the shortened links give juice to shortener
This varies depending on the website you use to shorten the URL. If it uses a permanent 301 redirect then the link will count, however not all URL shorteners use this type of redirect.
I think they will still count. Bit.ly uses 301 (moved permanently) redirects which should page link value as far as I know. Is that incorrect?
Think about it, does google like redirects? Thats all those url shortening services are, is a redirect site. It's just like when some B.S. directories only add links to your site like this: bsdir.com/link.php?ref=yourdomain.com. It's worthless from a backlink perspective....but does the traffic generated have value to your site? At some point your site needs valuable traffic to generate revenue, right?
I've never read the headers on these if thats the case then it would pass some value. However most sites where you post shortened links to, such as twitter, do a nofollow tag on the link. Which would negative any power from the link, right?