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.”
Make it as easy as possible for users to go from general content to the more specific content they want on your site. Add navigation pages when it makes sense and effectively work these into your internal link structure. Make sure all of the pages on your site are reachable through links, and that they don't require an internal "search" functionality to be found. Link to related pages, where appropriate, to allow users to discover similar content. Denver Page Rank Click Here
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