Question: Recently there has been a lot of hype about URL Shortening. I guess some URL Shortening services even offer tracking stats. But, doesn't adding one more level of look-up to the original URL affect page ranking in any way? Just curious to know.

Answer: 
IT depends upon the implementation from the URL shortener service. If they use HTTP 301 and/ or HTTP 302 in their redirects then Google are quite good in interpreting these correctly in accordance to Page Rank. However other parameters might be affected by URL shortening.

Most Search Engines uses anchor text and URL texts as a parameter to what to give hits for for a specific URL. And if the URL changes from <http://example.com/some-article-about-C> to <http://example.com/234432> then obviously the first one carries more information for the search engine which will make it perform better for "article" and "c"...
The criticisms of URL shortening have reached near hysteria. Combine this with SEO guidance that borders on superstition if not outright voodoo and you'll find a lot of (mis)information out there. [URL shortening is a storm in a teacup](http://www.cforcoding.com/2009/06/hysteria-over-url-shortening.html). Don't expect it to make any difference to search engines.