The notorious nofollow tag. Sometimes called the Link Condom, this tag is supposed to keep Google from passing PageRank and from following the link to give the link credit in Google’s “link Popularity” search engine.
The tag is added to an HTML link tag like -a href=”link-here” rel=”nofollow”– This is what Google has asked Webmasters to use when selling ads so that their search engine can figure out that this is not a link to credit. While the idea of Google using it for Ads is the reason for its creation, most webmasters use it for one purpose – to stop a spam penalty for linking OUT to a bad neighborhood.
Since Google’s last few updates seem to be mainly adding spam filters, many Webmasters feel Google’s “Auto Wrath” that they may be banned into ranking oblivion simply for linking out to someone that Google’s algorithm holds as a “bad neighborhood”. So Webmasters use it is comment tags on Blogs and in forums to help prevent spam posts for the purpose of inflating link popularity.
“nofollow” links actually show evidence of passing PageRank as they are listed in Google backlink reports for at least the past few months.
The fact may actually be that nofollow links may pass PageRank, and we only have evidence that ONLY Google follows this directive. Meaning Yahoo and MSN most likely will pass credit to the link with the nofollow tag anyway.
Some SEOs actually post into forums and blog comments purposely, even though they use the nofollow tag. Since these sites have High PR and are spidered often, the purpose is to get new sites indexed by the Search Engines, and out of the potential Google Sandbox, quicker. So they feel and believe that despite its name “nofollow”, Google is actually following the link and giving some kind of credit to it.
So you will have to decide for yourself, I personally think that this tag is limited in its use by Google, and over-inflated in its ability by Webmasters. It may one day be the links in the “nofollow” tag that are considered valuable.