Question about rel=next & rel=prev

Hi.

I have working on the following site:

http://www.remortgagesupermarket.co.uk/

The site is built in Wordpress and it appears that the template was
automatically spitting out rel=next | prev code for every page on the site.
We only realised this was happening when the client reported some drops in
rankings in the search engines. We removed the offending tags and the
client reported that search engine rankings were restored.

I was wondering if anyone could help me understand why drops in search
engines may have occurred? After doing some reading up on it my theory is
that search engines would essentially be reading the whole website as just
one page. Is this correct or am I barking up the wrong tree?