The No-follow tag
The tag that is designed to help google fight spam
Google introduced the rel="nofollow" tag to help sites distinguish between links they put up, knowing they trust the site in question, and links they put up not fully trusting the site they link to. Google does not count these links as backlinks . This means that a site will not get a higher pagerank from a link with rel-no follow on it.
Here's the code:
This is how the link would look after the nofollow attribute has been added, with the attribute portion shown in bold
<a href="http://www.site.com/page.html" rel="nofollow" >Visit My Page</a>
This would also be acceptable, as order of elements within the anchor tag makes no difference:
<a rel="nofollow" href="http://www.site.com/page.html" >Visit My Page</a>
Common usage of rel no follow is in forums, blogs and link-selling.
Forums and links
Many forums put the rel-no follow tag on signatures, to discourage people from posting only for that link in the signature. Some forums actually consciously leave out the tag, because they feel that people contributing to their forum, deserve the benefit of those links.
Blogs and links
Spam in blogs is a pretty pervasive problem. The same dynamics apply as in forums: people post who have no history with the site and site-owners can't be expected to check every link for usefulness. The rel nofollow tag is added to discourage people from posting, merely for the benefit of that link.
Link selling (directories etc.)
This is where it gets interesting. Links are sold for two very distinct reasons: visitors and pagerank . When links are bought for getting visitors, google feels the rel-nofollow tag should be applied. Google feels no links ought to be sold for pagerank purposes and tries to find whatever bought links it can find.
Because links to useless websites are going to hurt the site with the link on it (it is a 'bad neighborhood'), sites selling links will sometimes add the rel-no follow tag to links they don't feel comfortable with. This is bad form, especially if those links are sold because the site in question hopes to get a better pagerank out of it. There are firefox extensions that highlight rel-nofollow links to help webmasters and SEOs to determine whether links count for pagerank or not.