PageRank is an algorithm created by Google's founders to rank the importance of websites in the network of links on the internet. It uses a probability-based model to determine the likelihood that a random user would arrive at a given page. PageRank is calculated through an iterative process of evaluating the inbound links from other pages, with more weight given to pages that are already highly ranked. The example demonstrates how PageRank is computed for a simple network of four pages, with the highest ranking going to the page that receives a link from the page with the strongest inbound links.