Burke,
Prior service time does count toward your pay when you go back in.
Raptor,
For every rank that there is there is a letter and number designator for it(your paygrade). For example, a Sergeant in the Marines is an E-5. E standing for enlisted and 5 standing for the fifth position (starting from the bottom) on the rank structure/pay scale. The only difference between services is the name of the rank (Sergeant, Petty Officer First Class). The officer rank structure is the same (0-1, 0-2,etc..). If you see and O-1E it means that the person in question is an officer who was prior service enlisted. Although the on the Pay Scale this only counts up to O-3E. Look at the payscales at www.dfas.mil. It might make things a little more clear.