AlyssaS - 8:56 am on Aug 16, 2011 (gmt 0)

Here's an interview with Matt Cutts from 2010 on this subject:

[stonetemple.com...]

Eric Enge: If Googlebot sees an affiliate link out there, does it treat that link as an endorsement or an ad? Matt Cutts: Typically, we want to handle those sorts of links appropriately. A lot of the time, that means that the link is essentially driving people for money, so we usually would not count those as an endorsement. .... Eric Enge: If people do have ads on your site, it's still Google's wish that people NoFollow those links, correct? Matt Cutts: Yes, absolutely. Our philosophy has not changed, and I don't expect it to change. If you are buying an ad, that's great for users, but we don't want advertisements to affect search engine rankings.

My reading of that is that you should no-follow the affiliate links (and it's in your interest to do that anyway, unless you want to pass juice to the merchant so they outrank you).

P.S. There is lots more in that interview about a whole host of stuff and I recommend reading the whole of it.