In one of his posts this week, Matt Cutts of Google highlighted the fact that Google changed how the nofollow attribute works over one year ago.
You should read his post for a fuller explanantion, but basically, Google don’t recommend the use of the nofollow attribute any longer since it is no longer an effective tool for sculpting PageRank within your site. The reason, as Matt states, is that Google decided that the use of nofollow was demoting sections of websites that might ordinarily be considered useful to surfers ie. forums for example.
A link with nofollow still does not pass PageRank on, however, the change means that this doesn’t boost the PageRank value of the other links on the page that are ‘followed’ either ie. they only pass the same value as they would had nofollow not been used anywhere on the page at all. The essential thing you need to know is that nofollow links don’t help sites rank higher in Google’s search results – according to Google.