It was previously believed that the use of a nofollow tag on links would prevent the pagerank flow from going to these link and instead preserving it for more important pages on your site. Well it seems this is no longer the case.
What does this mean in terms of SEO? well in a nutshell lots of wasted Link Juice flowing down a black hole! Danny Sullivan explained it the idea of link juice flow perfectly:
“Consider it like this. Imagine authority is money, and a particular page has $10 in “authority” to spend. It links out to 10 pages, so each of those pages gets $1 ($10 divided by 10). If it links to 20 pages, each gets 50 cents ($10 divided by 20). If it links to 5 pages, each page gets $2 (you get the math by now).”
Matt Cutts from Google has officially shed some light on this topic:
On PageRank Sculpting