When you nofollow a link, you essentially throw away PR you could be redistributing to your own site.
The PageRank passed to any link on the page is 1 divided by the number of links on the page. If there are 5 links, then each gets 1/5 of the linking page’s PR.
When you nofollow 4 of the links, all 5 are still counted in that calculation, and the one that isn’t marked nofollow still only gets 1/5. The other 4/5 went nowhere, you wasted it.
So adding nofollow to all your own internal links will actually decrease the average PageRank of the pages in your own site. Many pages without external links, that would otherwise have some PR from internal links, would drop to 0 and have a hard time ranking for any search phrases.
This was verified last year by Matt Cutts at Google.
Clear! so what if ad nofollow to all outgoing links that are not belong to my domain (pointing to external sites). for example, i quote a news from bbc and mention the source as bbc.co.uk and ad nofollow to that link. i have tons of this type of links in my blog points to other sites. so now i have added nofollow to all of them. is this a good move?
Read what you quoted and you’ll see the answer. It doesn’t help you at all, it only hurts the sites you link to. You don’t lose anything by letting your source have some PR, that’s how the web is supposed to work. The purpose of nofollow isn’t to manipulate search engines, it’s to control spam in user generated content. Google has made it so that there is no benefit to using it for anything but that.