The original funding Larry got was from the Digital Library Initiative. Then the web blew up. Maybe I shouldn't say PageRank was designed for citations, but that is where it draws its influence from. Things don't magically pop out of no where. But if you look at the PageRank algorithm, it looks like it is designed for paper citations. As a graduate student, you start a some place and you end up at a different place from where you intended to end up.
My point is that one shouldn't be surprised to see that PageRank would work well for paper citations.
I think warrenmar is referring to the fact a paper's impact can be measured by counting the number of times other authors cite the original paper.
IIRC, Larry and Sergey used that idea as the conceptual framework behind PageRank. Indeed, they were right: the relevance of a search result can be increased tremendously by indexing as many pages as possible and then calculating how many people are linking to said page.
They don't do it like that anymore but that's the basic idea.
