Nofollow is a hyperlink inclusion that directs search engines, not to extend any credibility or influence to a specific hyperlink. Not to be confused with a nofollow used within a robots meta tag, Hidden wiki a rel="nofollow" actually tells the search engine "do not score this link"; as opposed to "do not follow this link." This aggressive approach was originally developed, to assist the blogging community in reducing the number of inserted links; into a "comment" area of a blog page. As such, nofollow was/is intended to reduce the effectiveness of certain types of search engine spam, thereby improving the over-all quality; of search results.

Resulting from the swift implementation of nofollow, link building efforts have had to be re-evaluated; to accommodate the wide-scale change. Many credible websites, including Wikis, social bookmarking websites and blogs, have implemented the nofollow rule; making effective link building difficult for inexperienced webmasters and questionable SEO and Marketing firms.

It is important to be aware, that each major search engine interprets the nofollow attribute; a little differently. Here is a short list of the most influential search engines, and their individual recourse; when a nofollow link is encountered:

Google follows nofollow links, but does not pass on credit to an outbound link; that is tagged with the attribute. This means that Google does not transfer PageRank, or anchor text across these links. Essentially, using nofollow encourages Google to discount the target links from their overall "graph of the Web." It is important to note however, that target webpages may still appear in the Google index, if other websites are linked to them without using nofollow; or if the URLs have been submitted to Google utilizing a sitemap.
Yahoo follows nofollow links, but excludes the link from all ranking calculations.
Bing (MSN) may, or may not, follow a nofollow link. It does however, exclude nofollow links from it's ranking calculations.
Ask.com does not adhere to nofollow.
Not to be quickly discounted, every carefully planned link building campaign should have a fair representation; of nofollow links. Although they do not pass on any link power, website credibility or result influence, they do work tirelessly to associate your website; with carefully selected anchor text or keyword phrase (Hint: your brand). This approach is incredibly important, and should be strongly considered, when introducing branding strategies; to a new or existing optimization (SEO) campaign. Remember, the nofollow attribute applies to search engines; not motivated consumers.