Sk-etchbook

Fist off there are two types available here which shouldn't be confused. The meta tag and the link attribute.

"Nofollow" provides a way for webmasters to tell search engines "Don't follow links on this page" (the former) or "Don't follow this specific link" (the latter).

With the rise of social media and web 2.0 the link structure of the internet suddenly changed. As one of the measures of spam or link farming used by robots previously looked at the speed at which a website had gained links to it. The new forms of social media caused a problem as hundreds even thousands of links could appear in a day.

Here is Googles own page about nofollow and what it does.

However there seems to be some resistance towards it's use and it's practicality. Read more...