What happens if you lose PR?

The perceived 'value' of your site goes down, but that is because many, many people (too many people) use PR as an indication of value - I think the smarter people will start to look at traffic figures and readership as an indication of value.

I believe in the long run, your content is the most important element, and the less relevant PR becomes, the less people will use it as an indication of value.

I think what is happening now is that bloggers must rethink whether they are looking for traffic or monetisation, Google is making it difficult to achieve both, if you want Google's SERP you have to bow to their rules. However this is not the only means of getting traffic. If you don't require traffic from Google, then SEO does not matter THAT much.
If you are totally traffic-oriented then you must be absolutely topical or mine a niche very thoroughly.
I have made a post on my main blog which examines closely the effect of losing PageRank on a website, I have looked at the statistics to work out if the PR drop (unjustified as far as I can see since the site in question does not pay for links at all) from a PR of 3 at the start of the year to a PR of 0 right now...

I have two blogs with which I have been more SEO conscious and these are designed around two niche areas. Of these sites, one has a PR of 2, and the other one is yet to be ranked. For these, I will be very careful about the content ensuring that posts are strictly in line with the niche, and careful about how I link to other sites, only choosing on-topic links. This will enable me to do very specific on-topic paid blog posts, and also sell text-links to on-topic sites. This is the more subtle paid-blogging which will replace the more blatant forms that we have become accustomed to.

The reason for this careful behaviour is that for these sites, I will require Google to send me traffic organically, one in particular reports on current events, and will frequently attract search engine traffic. This is not true of all blogs, and the key is deciding whether you need to model your blog along PR lines, or whether you can afford to ignore PR and plough your own furrow. Remember PR is not directly linked to traffic, it is only linked to traffic from search engines.