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When I applied to grad school it seems like the only places I got into were places that had someone on the faculty who knew one of my recommendation letter writers. How much does that matter? For example, if they are colleagues and/or work in the same area?

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    Its importance is 3.8 on the importance scale.
    – user2705196
    Mar 30 at 17:29

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It does matter considerably, I think, though perhaps not decisively. Why should it matter at all? Aren't we supposed to be getting away from good-ol'-boy networking? Yes, but/and, still, it is hard to know the benchmarks for the opinions of someone one doesn't know at all. "Exceptional" can mean very different things for different people, obviously, depending on their environment, experience, etc. And, no, we don't generally require extensive bios from letter-of-recommendation writers, so...

So, yes, prior acquaintance matters, but maybe not so much for bias-y reasons as for (quite reasonable) comprehensibility of the relative senses of the opinions.

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    There are times when prior acquaintance with the letter writer may well count against the candidate, particularly if previous highly-recommended candidates did not work out well. But that is also a comprehension of the relative opinions.
    – Jon Custer
    Mar 30 at 18:55
  • Doesn't that mean that students whose letter writers are well-known have an unfair advantage? You could have two students with the same application except for the person writing the letter, and assuming that the letters say exactly the same thing, the applicant with the more known writer will have an edge.
    – cgb5436
    Mar 31 at 0:54
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    @cgb5436: It is an advantage, and I would struggle to call it fair, yes. But there is so much "unfairness" of this kind in the academic (and the non-academic) world. Someone of a higher socio-economic status has a not fair advantage; someone who grows up close to excellent schools has a not fair advantage; a student of area X whose parents are professors of X has a not fair advantage. In this case, the best we can do may be to inform students that this sort of thing matters.
    – Pete L. Clark
    Mar 31 at 16:36
  • @PeteL.Clark I guess it's better to tell the truth than to pretend that it doesn't matter. I think the mentality of, "Why should we hire from this low-ranked department when we can get someone from this high-ranked one?" is very common.
    – cgb5436
    Apr 2 at 6:04
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I'm not sure I have ever heard of a single one of the letter writers of any of the grad students I have taken on.

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