The Similar Articles link is as straightforward as it sounds. PubMed uses a powerful word-weighted algorithm to compare words from the Title and Abstract of each citation, as well as the MeSH headings assigned. The best matches for each citation are pre-calculated and stored as a set.
You may see a few citations without the Similar Articles link, which simply means that these citations have not yet gone through the algorithm. This process may take several days.
For a detailed explanation of the algorithm, see Computation of Similar Articles.