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Any ideas?
When should the answer be yes?
I guess it would be when you are going to link out too much (Loads and loads of external links)
When would it be no?
The answer would be when you want more traffic. generally people (Webmasters in particular) are attracted to do follow blogs as commenting would provide them with a valuable source of in bound link
As for any other reason to use nofollow, that depends on exactly what your reason is for doing so.
1) nofollow was invented (as jimb states) so that you could link to sites without giving them a 'vote'.
2) Some people point to the mathematical implications of outlinks exceeding internals. Which is to say you do not 'recycle' (or, depending on your POV, 'hoard') your PR, rather you 'leak' it.
3) Others point to the 'bad citizen' effect of nofollowing legitimate links. Conceptually, think what would happen if everyone Nofollowed all their links.
4) Whatever the reason for a followed link, SEs (and G in particular) will penalise you for linking to dodgy content (or sometimes linking to sites that link to dodgy content). I don't mean the pointless, vacuous content that infests the web, rather driveby download sites, malware hosters, spammy sites and the like. Oftern refered to generically as "Bad Neighbourhoods"
There is a great thread here [webmasterworld.com]. Though its mostly about PR sculpting, there is some discussion about origins and applications.
I would say, on balance, nofollow:
Sitewide outbound links
Any UGC (possible exception for trusted members)
Any reference to something you do not like (e.g. "I hate those guys over at Scammers-R-us.tld)
I would follow
All endorsements
All positive editorial reference
Then, once I had set myself a clear policy on outbounds, I would concentrate on the other half of the PR issue- getting the quality inbounds.
<edit for clarity>
[edited by: Shaddows at 9:55 am (utc) on Jan. 14, 2009]
[edited by: caveman at 3:57 pm (utc) on Jan. 14, 2009]
[edit reason] Delinked link [/edit]