John Battelle has a short interview with Google spam fighter Matt Cutts. The most interesting part I found was news that the W3C has added a meta nofollow tag to their page with paid links, which Matt seems to say is the same as the completely different nofollow attribute and thus something acceptable for to do by those selling links who fear the wrath of Google.
Let's back up. You can put a meta robots tag on your pages with the value of "nofollow," as described here. This tag, about 10 years old now, long predates any concerns about link selling skewing search results or the nofollow attribute. It is supposed to tell a search engine not to follow any links on a page, for purposes of indexing those links.
In other words, you've got a page with 20 links leading to other pages in your web site. Put nofollow into a meta robots tag, and you're telling the search engine not to follow the links on that page to those other pages.
An important note. Just using nofollow doesn't protect those other pages from being indexed. If there's any other links pointing at them from anywhere on the web, search engines will follow through to them that way. So if you don't want them indexed, you need to make use of a meta noindex tag or robots.txt text to specifically block them.
Now on to the nofollow attribute. Created in January 2005, it was a way to flag particular links to search engines as those a site owner doesn't explicitly approve of. It was never defined as a means to telling search engines not to actually "follow" the link. It was more a way to say that you don't endorse the link. In fact, to my knowledge, Yahoo and perhaps others will still "click on" or follow links even if they make use of the nofollow attribute.
Now to the W3C. W3C Selling PageRank Or Thanking Supporters? covers how some have felt they've effectively been selling links without using the nofollow attribute that Matt Cutts in particular has urged those selling links to do, lest they potentially be penalized by Google.
In Matt's interview, we read that using nofollow in the meta robots tag might be seen as the same thing as a nofollow attribute, at least in Google's eyes. That's a completely new thing to me. I've commented on Matt's blog post about the interview, to see if he'll clarify more.
Aside from nofollow, the interview also gets into some interesting discussion of whether Google should do more to use humans in refining results.
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