When would this be useful? If your site has a blog with public commenting turned on, links within those comments could pass your reputation to pages that you may not be comfortable vouching for. Blog comment areas on pages are highly susceptible to comment spam. Nofollowing these user-added links ensures that you're not giving your page's hard-earned reputation to a spammy site.
Matt, in almost every example you have given about “employing great content” to receive links naturally, you use blogs as an example. What about people that do not run blog sites (the vast majority of sites!), for example an E-Com site selling stationary? How would you employ “great content” on a site that essentially sells a boring product? Is it fair that companies that sell uninteresting products or services should be outranked by huge sites like Amazon that have millions to spend on marketing because they cant attract links naturally?
The new digital era has enabled brands to selectively target their customers that may potentially be interested in their brand or based on previous browsing interests. Businesses can now use social media to select the age range, location, gender and interests of whom they would like their targeted post to be seen by. Furthermore, based on a customer's recent search history they can be ‘followed’ on the internet so they see advertisements from similar brands, products and services,[38] This allows businesses to target the specific customers that they know and feel will most benefit from their product or service, something that had limited capabilities up until the digital era.
A: For a couple reasons. At first, we figured that site owners or people running tests would notice, but they didn’t. In retrospect, we’ve changed other, larger aspects of how we look at links and people didn’t notice that either, so perhaps that shouldn’t have been such a surprise. So we started to provide other guidance that PageRank sculpting isn’t the best use of time. When we added a help page to our documentation about nofollow, we said “a solid information architecture — intuitive navigation, user- and search-engine-friendly URLs, and so on — is likely to be a far more productive use of resources than focusing on crawl prioritization via nofollowed links.” In a recent webmaster video, I said “a better, more effective form of PageRank sculpting is choosing (for example) which things to link to from your home page.” At Google I/O, during a site review session I said it even more explicitly: “My short answer is no. In general, whenever you’re linking around within your site: don’t use nofollow. Just go ahead and link to whatever stuff.” But at SMX Advanced 2009, someone asked the question directly and it seemed like a good opportunity to clarify this point. Again, it’s not something that most site owners need to know or worry about, but I wanted to let the power-SEOs know.
At IMI, we have the ability to incorporate Affiliate Marketing into any integrated digital marketing campaign in order to push product sales and drive revenue. We believe that this is just one piece of the digital puzzle however. Affiliate campaigns can incorporate many aspects of digital marketing including web design and development, display, paid search, conversion optimization, and SEO.
Bob Dole (interesting name), you’re certainly welcome to use Bing if you prefer, but before you switch, you might check whether they do similar things. I know that Nate Buggia has strongly recommended not to bother with PageRank sculpting in the past, for example, or at least that was my perception from his comments at the last couple SMX Advanced conferences.
Thanks for sharing this, Matt. I’m happy that you took the time to do so considering that you don’t have to. What I mean is, in an ideal world, there should be no such thing as SEO. It is the SE’s job to bring the right users to the right sites and it is the job of webmasters to cater to the needs of the users brought into their sites by SEs. Webmasters should not be concerned of bringing the users in themselves. (aside from offsite or sponsored marketing campaigns) The moment they do, things start to get ugly because SEs would now have to implement counter-measures. (To most SEO tactics) This becomes an unending spiral. If people only stick to their part of the equation, SEs will have more time to develop algorithms for making sure webmasters get relevant users rather than to develop algorithms for combating SEOs to ensure search users get relevant results. Just do your best in providing valuable content and Google will try their best in matching you with your users. Don’t waste time trying to second guess how Google does it so that you can present yourself to Google as having a better value than you really have. They have great engineers and they have the code—you only have a guess. At most, the SEO anyone should be doing is to follow the webmasters guidelines. It will benefit all.
Things are constantly changing, there is even evidence that nofollow links do count on some occasions. Its really a very complex subject as there is a formula behind the algorithm that takes many factors into consideration trying to guess what factors come into play is very difficult. I always focus on making the site as useful as possible to as many people as possible this is the end goal for search engines as well as webmasters. Webmasters who do this whilst observing the search engine’s guidelines should not have problems in reaching the top.
World Wide Web, or “the web” for short, is a network of web pages connected to each other via hyperlinks. Each hyperlink connecting to a new document adds to the overall growth of the web. Search engines make it easier for you to find these web pages. A web page linked by many other web pages on the similar topics is considered more respectful and valuable. In the above example, John’s article gets the respect for sparking a conversation that resulted into many other web pages linking to each other. So backlinks are not only important for a website to gain respect, they are also important for search engines and the overall health of the entire world wide web.

Bob Dole (interesting name), you’re certainly welcome to use Bing if you prefer, but before you switch, you might check whether they do similar things. I know that Nate Buggia has strongly recommended not to bother with PageRank sculpting in the past, for example, or at least that was my perception from his comments at the last couple SMX Advanced conferences.
where N is the total number of all pages on the web. The second version of the algorithm, indeed, does not differ fundamentally from the first one. Regarding the Random Surfer Model, the second version's PageRank of a page is the actual probability for a surfer reaching that page after clicking on many links. The PageRanks then form a probability distribution over web pages, so the sum of all pages' PageRanks will be one.
“Google itself solely decides how much PageRank will flow to each and every link on a particular page. In general, the more links on a page, the less PageRank each link gets. Google might decide some links don’t deserve credit and give them no PageRank. The use of nofollow doesn’t ‘conserve’ PageRank for other links; it simply prevents those links from getting any PageRank that Google otherwise might have given them.”

Just as some backlinks you earn are more valuable than others, links you create to other sites also differ in value. When linking out to an external site, the choices you make regarding the page from which you link (its page authority, content, search engine accessibility, and so on) the anchor text you use, whether you choose to follow or nofollow the link, and any other meta tags associated with the linking page can have a heavy impact on the value you confer.
There is another way to gain quality backlinks to your site, in addition to related site themes: anchor text. When a link incorporates a keyword into the text of the hyperlink, we call this quality anchor text. A link's anchor text may be one of the under-estimated resources a webmaster has. Instead of using words like "click here" which probably won't relate in any way to your website, using the words "Please visit our tips page for how to nurse an orphaned kitten" is a far better way to utilize a hyperlink. A good tool for helping you find your backlinks and what text is being used to link to your site is the Backlink Anchor Text Analysis Tool. If you find that your site is being linked to from another website, but the anchor text is not being utilized properly, you should request that the website change the anchor text to something incorporating relevant keywords. This will also help boost your quality backlinks score. 

If the algorithm really works as Matt suggests, no one should use nofollow links internally. I’ll use the example that Matt gave. Suppose you have a home page with ten PR “points.” You have links to five “searchable” pages that people would like to find (and you’d like to get found!), and links to five dull pages with disclaimers, warranty info, log-in information, etc. But, typically, all of the pages will have links in headers and footers back to the home page and other “searchable” pages. So, by using “nofollow” you lose some of the reflected PR points that you’d get if you didn’t use “nofollow.” I understand that there’s a decay factor, but it still seems that you could be leaking points internally by using “nofollow.”
Matt, this is an excellent summary. I finally got around to reading “The Search” by John Battelle and it was very enlightening to understand much of the academia behind what led to the creation of Backrub.. er Google.Looking at how many times the project was almost shutdown due to bandwidth consumption (> 50% of what the university could offer at times) as well as webmasters being concerned that their pages would be stolen and recreated. It’s so interesting to see that issues we see today are some of the same ones that Larry and Sergey were dealing with back then. As always, thanks for the great read Matt!
I think that removing the link to the sitemap shouldn’t be a big problem for the navigation, but I wonder what happens with the disclaimer and the contact page? If nofollow doesn’t sink the linked page, how can we tell the search engine that these are not content pages. For some websites these are some of the most linked pages. And yes for some the contact page is worth gaining rank, but for my website is not.
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