Recent quotes:
once a connection is made by someone typing in a brand name or other search query and then clicking on a site it creates a connection in Google's eyes. The search engine can then store that info and use it in the context of unlinked mentions around the web in order to help weight rankings of particular sites.
The fact is that inbound links to a web site remains a very strong ranking signal, and it will remain that way for some time to come. The search engines won’t move away from using links as a ranking signal until the have a better signal source, and they don’t have that yet. In fact, Google’s Matt Cutts recently confirmed that they have tested a version of Google that does not use links as a ranking factor, and they abandoned it.