NoFollow is a HTML tag you can place on a link to tell search engines not to follow that link. The link will not pass any link juice to your site. The only benefit of the link will be the traffic it sends.

Note: Some larger sites such as wikipedia automatically make their links nofollow.

How to NoFollow Properly

Normal Link

<a href="http://www.link.com">Anchor Text</a>

NoFollow Link

<a href="http://www.link.com" rel="nofollow">Anchor Text</a>

Aaron Wall, from SEOBook has a Firefox plugin called SEO for Firefox that will show you which links are nofollow when your browsing the Internet. This will stop the madness of viewing the source code of every webpage your link is on.