Since Google began ranking pages, it has always used links as votes. The more links from trusted sources that are directed at a particular site, the higher that site ranks. The “rel=nofollow” tag was introduced so that webmasters could decide which sites to give their vote. Adding “rel=nofollow” tells Google’s bots that the site that is being linked to is not trustworthy or shouldn’t get credit for the link. While there is disagreement about whether Google truly respects the nofollow, there is little doubt that a link with a nofollow attribute is not as valuable as a link without it.
Understanding these effects is important in understanding how to link to pages within one’s own website. Since “rel=nofollow” does not pass equity to the domain or page it is linked to, best practice (save for a few exceptions) is to avoid adding the attribute to links that are directed at internal pages on one’s own site.