Nofollow is a bit of code that you add to a link that signals to Google that the link going from this page to another site that is supposed to tell search engines not to follow that link. Search engines do still follow the link, but Google won’t give that link the same kind of value as when this kind of link isn’t involved (aka DoFollow links). There are many web 2.0 sites that give nofollow links sitewide, like YouTube. That doesn’t mean that the link isn’t still valuable - it is! But it’s not as valuable as it would be otherwise.

via EnExT Consultants