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How 'nofollow' links help your Google Ranking
In this short hub I will explain the value of nofollow links in Google rankings. I will begin by explaining the surface information, and then delve in to what it means to webmasters and SEOs.
Google states that their engine takes "nofollow" literally and does not "follow" the link at all.
--Wikipedia: nofollow article
Based upon this, we might expect that a 'nofollow' link would have no effect upon search rankings. Experimental data, conflicts with this.
Experimental results have shown that Google will only ignore a nofollowed link if it is not already known to Google.
For already indexed pages, this means that Google will use the link text for its content rank.
How Content Rank Effects Search Rankings
Lets say you own the blog 'baseball equipment reviews' and a competitor owns the blog 'best baseball equipment'.
Lets say a potential customer searches for the phrase 'best baseball bats'.
Google will rank your two blogs based on its measurement of relevancy (content rank), and importance (PageRank and many other indicators). If your pages had equal importance, the 'best baseball equipment' blog will likely be ranked first, because (presumably) it has a higher content score for the term 'best'.
It would be possible to overtake this competitor by significantly raising your blogs importance relative to the other blog, by raising your content score for the term 'best' or a combination of the two
I mentioned earlier that PageRank is only one of many factors that goes in to Google's measurement of page importance.
Two known, important factors include page views by users with the Google toolbar, and special weightings to 'social' links. These factors can both be significantly effected by nofollow links.
The other factors used by Google to rank pages are not all known. Google claims to use a very large number of such factors.
So long as the linking page is of some quality, and you are not simply spamming that page, it is safe to assume that a nofollow link will have some value; exactly how much, only Google knows.