QUOTE : “ Rel NoFollow is an elemental microformat, one of several microformat open standards. By adding
rel="nofollow"to a hyperlink, a page indicates that the destination of that hyperlink should not be afforded any additional weight or ranking by user agents which perform link analysis upon web pages (e.g. search engines). Typical use cases include links created by 3rd party commenters on blogs, or links the author wishes to point to, but avoid endorsing .” Microformats.org
When it comes to search engines like Google, a link from one site to another site is a ‘vote’ for the website that has the link pointing to it (an example of a link that passes Pagerank).
Links help Google rank documents on the web in its SERPs (Search Engine Results Pages), and as such, have long been abused by link builders. I used to be one of these types of link builders (before 2012 when Google released the Google Penguin algorithm update).
QUOTE : “ Nofollow links definitely don’t pass PageRank. Over the years, I’ve seen a few corner cases where a nofollow link did pass anchortext , normally due to bugs in indexing that we then fixed. The essential thing you need to know is that nofollow links don’t help sites rank higher in Google’s search results .” Matt Cutts, Google 2009
For discourse check Admin / Settings / Spam for the option to turn this on or off.