"Dangling links" are simply links that point to any page with no outgoing links. They affect the model because it is not clear where their weight should be distributed, and there are a large number of them. Often these dangling links are simply pages that we have not downloaded yet..........Because dangling links do not affect the ranking of any other page directly, we simply remove them from the system until all the page ranks are calculated. After all the page ranks are calculated they can be added back in without affecting things significantly." - extract from the original page rank paper by Google’s founders, Sergey Brin and Lawrence Page.

A dangling link is a link to a page that has no links going from it, or a link to a page that Google hasn't indexed. In both cases Google removes the links shortly after the start of the calculations and reinstates them shortly before the calculations are finished. In this way, their effect on the page rank of other pages in minimal.

Although it may be functionally good to link to pages within the site without those pages linking out again, it is bad for page rank. It is pointless wasting page rank unnecessarily, so always make sure that every page in the site links out to at least one other page in the site.