This question is debated hotly in many SEO (Search Engine Optimization) forums. The answer, like so many others can be easily obtained by performing a statistical analysis of the actual results from the leading search engine. This article presents the results of such an analysis.
I used the following methodology to answer this question. I gathered the results of the queries I naturally performed last month using the leading search engine and analyzed them. I then counted the number of listings that had at least one dash in the domain vs. those that didn't have any dashes. This data was tabulated against the ranking for the first 8 search engine listings.
Here is the graph:
http://www.SearchEngineGeek.com/graphs/dag02.jpg (Note to webmasters: You have permission to hot-link to the graph, text link to it, or even copy it to your own site)
The X-axis shows the ranking from 1 through 8 on the leading search engine. The Y-axis shows the number of domains that contained dashes. There is no obvious correlation, which indicates that domains containing dashes are generally equally distributed. They are neither more likely to be ranked higher, nor lower.
There is an odd result for the first three positions, which I suspect is merely a statistical quirk. I generally look for an overall coorelation (scale: -100 to +100) of above +33 or below -33 to consider something statistically significant using the amount of data I studied. The ranking correlation in this case was -21. The fact is that the leading search engine, on average, did rank domains containing dashes slightly lower than domains that did not contain dashes, but not significantly so.
Note:
For the purposes of this test, only the domain portion of the URL was studied. Dashes present in the rest of the URL were not counted as domains with dashes if the domain itself did not contain any dashes.
Conclusion:
When looking at the first 8 positions, the leading search engine ranks domains containing dashes slightly lower in the data we studied, however the correlation is not solid enough to be significant. This is merely a correlation study, so it cannot be determined from this study whether the leading search engine purposefully entertains this factor or not. The actual factors used may be far distant from the factor we studied, but the end result is that this search engine does, in fact, rank domains containing dashes slightly lower than domains containing no dashes.