Loren Baker has asked Google, Yahoo, Microsoft and Ask.com to explain just what nofollow really means in a comprehensive post at Search Engine Journal, "How Google, Yahoo & Ask.com Treat the No Follow Link Attribute."
Google is the only one to actually not follow the links, while Ask ignores the attribute, and Yahoo will follow the link but not give attribution to the source. So basically, the anchor text and "link juice" will not pass through a nofollow link in Yahoo, but the linked page will be crawled and indexed.
Microsoft has not yet replied to Baker's request for clarification, but had said when nofollow was introduced 2 years ago, "Any link with this tag will indicate to a crawler it is not necessarily approved by this page and shouldn't be followed nor contribute weight for ranking."
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