There are two more ways of defining a backlink; these are "Do-follow" links and "No-follow" links.
A "Do-follow" Link is a hyperlink that is in a position to tell search engines to pass along its page rank authority to an outbound link.
A "No-follow" Link is exactly the opposite. This is a hyperlink that removes the ability to pass on its page rank status to other sites.
How do "Do-follow" and "No-follow" Links Work?
In order to read a webpage and search for content, a Google Spider will visit and read through websites. While doing so, it will regard links with a “do-follow" feature and exclude any links with a "no-follow" attribute. Therefore, your PR will get better with Bing or Yahoo if the spider likes what they see on a “do-follow” site. Moreover, if they come across a “no-follow” link, they will fail to respond to it and thence harm your online presence.
In conclusion, search engines will improve your rank in the search results if you have more backlinks from high PR sites. The more the “do-follow” links to your sites, the better and higher you will rank on Google and the other search engines.
Where to Place No-follow or Do-follow Backlinks:
Sites, which are updated frequently, and those that have high traffic is where you should aim at posting. This will obtain you better search engines status as well as a higher Page Rank. However, one key point to remember is that your web content should match the content of the site that you intent to post in since search engines will be on the lookout for related backlinks.
In conclusion, when adding either no-follow or do-follow backlinks your objective should be to have as many quality and related backlinks to your sites as possible to help improve your search engine rankings and your authority status on Google!
Reasons for using No-Follow Links
No-follow links are useful if you want to link out to a site with questionable content, adult content or employs questionable linking tactics. You can also use no-follow links to stop spiders getting to sites that you feel have enough links of their own like Hacker Safe or sites you have to pay to get their badge on your site. Such sites do not need your link.
Also, use these links if you are creating a page that does not need a webpage ranking. This can be an internal page, a small function page or a page that is only needed by people who already know