Having a Related Posts feature on your blog creates more interconnections between blog posts, which is a good thing as it passes around more link gain (e.g. PageRank). I recently installed the Contextual Related Posts plugin on my blog, so now you’ll be able to see that each permalink page lists related posts at the bottom of the page.

Most blogs are overreliant on the chronological archives, which tells the search engines to weight your recent posts more heavily. But an old post may be really well optimized and targeting a really important keyword. So that post needs more link gain, and that means more links pointing to that page and links from pages higher up in the site hierarchy. Linking to related posts creates an alternative linking structure to augment your chronological archives.