One little addition to the discussion:
* Nofollow affects only flow of pagerank.
* Nofollow does not affect whether the search engine will crawl the page addressed by the link
* Nofollow does not affect whether the search engine will take into account the relevance of the anchor text on the link and the page addressed by the link
So in all respects except for pagerank, a nofollow link is equivalent to a ******** link. While it's easy to find ******** links, I'm never one to reject a nofollow link if I can get one. Nofollow links do contribute to the search engine's idea of what the addressed page is about (via the anchor text) and they definitely do contribute to a page's placement in the search engine results.
As with all things in life, this is not a white-black issue. There are many shades of grey in between.