I get what you mean, that it's a seeming discrepancy, but in the larger scheme of things, it's a quibble, not a smoking gun. Nofollow has context for web publishers who wish to participate in having their site spidered and indexed by Google.
You are either in or you are out. You can't be both. If you choose to be in then you have to understand the rules, such as using nofollow for advertising.
On the one hand you have google saying you should build for users and not for search engines but on the other they are saying “do this with us in mind or get a penalty”.
If you use eBay you are obligated to obey their rules. Don't like the rules? Open up a brick and mortar. eBay is not Commerce. Similarly, Google is not the Internet. It is one company with it's own ecosystem of site users, just like eBay, Facebook, and Yahoo. You are either in or you are out. Your choice.
Google is not the Internet. You are free to play by your own rules.
With all this fear of linking, can it at all play into googles hands in terms of hurting their competition at all? Could there is a darker undertone here in controlling links in this way that will make other search engines less effective
The answer is no. The nofollow attribute was introduced with the cooperation and participation of MSN and Yahoo. Here is the announcement. [googleblog.blogspot.com] All the major blog software companies were on board with the initiative from the very beginning. Again, read the link I provided so that you can gain a historical perspective on the actual origins of nofollow.
[edited by: martinibuster at 6:24 pm (utc) on Aug 31, 2013]