I know someone who has a site, which has only 1 backlink in google according to link: in google and iwebtool.com and many other sites. It is a PR2 backlink and on that page are 7 other outgoing links to other sites. There has been no marketing done to the site in question, except for adWords. The site now has a PR4! How is this possible? I thought pagerank was based solely on backlinks? Does anyone have any other examples or known cases of this phenomenon?
NO, Adwords have nothing to do with your PR. They are not considered as back links. It is just a script
Adwords can bring a lot of targetted visitors to your site....this increases your site popularity and word of mouth gets arround....if your site is good and usefull...these visitors and their friends will remember it and before long many (who have a website) will link to it without even asking you....(especially if your site is to do with websites and hosting!) ...this will lead to a better PR. So I would say 'yes' but indirectly.
Maybe they also have backlink from some other site. Google is known for not showing all the backlinks. Search for backlinks via Yahoo or MSN for better results.
Or seach for "www.domain .com" as this can show up loads more results and can indicate how many backlinks google may show in the future (the backlinks will never reach anywhere near the number shown using this method by the way).
Page Rank is based only on backlinks to your site, nothing else. Not content, not the design of your site, not adwords or adsense. Google shows only a portion to backlinks to keep others from trying to duplicate backlinks of a top ranking site. A PR4 is very easy to obtain, a single PR5 link can do it. There are probably a few backlinks not showing on google - even though these links don't show, they can still pass PR.