I like to think of PR as like water flowing, and websites and pages as like pipe systems.
Most InBound Links (IBLs) will point to the site index page - so think of water flowing to the the entrance to your site. If you simply link into your internet pages, then all of this water flows through to those pages, splitting off and distributing itself.
However, if you link out from your index page, then as soon as the water flows to your site, you suddenly have a significant amount of water diverted away to another site. That can only mean less water flowing into your internal pages.
It's just an analogy I like.
