I just tried a search in Google that I had never tried before. It is 'related:www.thedomainofyourchoice.com'. The question is what is the relationship between these pages? In the few searches I have tried it looks like it is mostly sites on the same server -- but now all the sites. Then there are sites that can only be explained by out going links -- but again not all out going links. Strange set of data presented.
Primarily, it seems to be based on linking (although not direct linking). You will find that much of the results are made of of pages that are linked to from a 3rd party site that also links to the page you are running the query for. There is more to it, but that seems to be the biggest factor. - Shawn
I had to go back and remind myself! Senior moments!!! It is pages that have a relevance to what is on your pages in the order that Google thinks that your pages have in the heirachy of things. eg on our ski france site we have pages within the domain that relate to Les Arcs, Tignes, Notre Dame de Bellecombe - you will see that in our description - if you do a related:www.ski-france-ok.com
I see that Shawn has added the linking bit and I tend to agree, but as we do very little external linking I think it has more to do with us with our content.
the sites are cross linked on deep level pages, also if you check the nameservers are the same, you can do a dns check a dnstools.
My main site brings up many of my competitors and sites very closely related to my topic with a related: search (nothing to with with interlinking in this case). The site dominates the SERP's for its KW's too This is a Very Good Thing if your site can achieve this - it means Google has a very clear definition of your sites themeing
related sites mostly have the sites that are very similar to your site. For example i run a webmaster forum and my related sites shows all other webmaster forums. even dp shows up in the list of related links