Linking to another Web page can influence that page rankings in the search engines. Nofollow attribute is used to prevent the passing of PageRank from one page to another. Adding the nofollow to a link tells the search engines not to use that link as a positive factor in their ranking algorithm.
For outbound links you may want to consider the relevancy of the link to the page in which it is placed. If the outbound link provides value to your customers, then include it. Try to link to content which is on the same theme – if you can’t, then consider using the nofollow attribute. If you want to link to a page but not influence that page’s rankings, attach the rel=nofollow attribute to a link.
Another example of using nofollow attribute is when your Web site has numerous categories or themes interlinked. Google will use your links to try and help determine what the current page (where the links are located) is about. If you dilute your page by linking to many different topics, then you make it harder to rank well for the theme of your page. Normally, you link to other pages of your site directly from the main page of your Web site. You might not be interested in certain page’s ranking ( blog comments links, company information page, contact us page) , add a nofollow attribute to these links throughout your site, and you prevent wasting the passing of Page Rank to these pages.
Google introduced the nofollow atrribute in early 2005, Yahoo and Bing claim to adhere to this rule as well. However some SEO specialists theorize that Google now do not take this tag into consideration when crawling through links.