Inbound links (links into the site from the outside) are one way to increase a site's total PageRank. The other is to add more pages. Where the links come from doesn't matter. Google recognizes that a webmaster has no control over other sites linking into a site, and so sites are not penalized because of where the links come from. There is an exception to this rule but it is rare and doesn't concern this article. It isn't something that a webmaster can accidentally do.
The linking page's PageRank is important, but so is the number of links going from that page. For instance, if you are the only link from a page that has a lowly PR2, you will receive an injection of 0.15 + 0.85(2/1) = 1.85 into your site, whereas a link from a PR8 page that has another 99 links from it will increase your site's PageRank by 0.15 + 0.85(7/100) = 0.2095. Clearly, the PR2 link is much better - or is it? See here for a probable reason why this is not the case.
Once the PageRank is injected into your site, the calculations are done again and each page's PageRank is changed. Depending on the internal link structure, some pages' PageRank is increased, some are unchanged but no pages lose any PageRank.
It is beneficial to have the inbound links coming to the pages to which you are channeling your PageRank. A PageRank injection to any other page will be spread around the site through the internal links. The important pages will receive an increase, but not as much of an increase as when they are linked to directly. The page that receives the inbound link, makes the biggest gain.
It is easy to think of our site as being a small, self-contained network of pages. When we do the PageRank calculations we are dealing with our small network. If we make a link to another site, we lose some of our network's PageRank, and if we receive a link, our network's PageRank is added to. But it isn't like that. For the PageRank calculations, there is only one network - every page that Google has in its index. Each iteration of the calculation is done on the entire network and not on individual websites.
Because the entire network is interlinked, and every link and every page plays its part in each iteration of the calculations, it is impossible for us to calculate the effect of inbound links to our site with any realistic accuracy.
Outbound links are a drain on a site's total PageRank. They leak PageRank. To counter the drain, try to ensure that the links are reciprocated. Because of the PageRank of the pages at each end of an external link, and the number of links out from those pages, reciprocal links can gain or lose PageRank. You need to take care when choosing where to exchange links.
When PageRank leaks from a site via a link to another site, all the pages in the internal link structure are affected. (This doesn't always show after just 1 iteration). The page that you link out from makes a difference to which pages suffer the most loss. Without a program to perform the calculations on specific link structures, it is difficult to decide on the right page to link out from, but the generalization is to link from the one with the lowest PageRank.