What is a “nofollow” Tag:
It provides a way for webmasters to tell search engines “Don’t follow links on this page” or “Don’t follow or crawl this specific link.”
It instructs the search engines not to count some of their links to other pages as “votes” in favor of that content. nofollow tag appeared in the page level meta tag.
<meta name="robots" content="nofollow" />
When to Use nofollow Tag
1) Paid Links
In order to prevent paid links from influencing search results and negatively impacting users because your site’s Google search ranking is based on those sites link to it.
2) Comments
If you have allowed anyone to comment without moderation. Using nofollow tag prevent your site to pass any credit or link-juice.
3) “Register Here” or “Sign in” Links:
Using nofollow tag prevent Googlebot from crawling such links instead of crawling the other pages you’d prefer to see in Google’s index.
Matt Cutts on nofollow Tag
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