This seems to be a lukewarm topic since early 2002 in the SEO world and even into today's present digital landscape. People are on both sides of the fence about "why" or "why not" to use rel="nofollow" on your internal links. Here's my POV (point of view for those that despise acronyms.)
Why to use it...
- There are certain pages you may not want crawled and indexed by search engines like Login, Cart, etc. (Alternative is also to use Robots.txt file and just omit those there - we do this at our agency Digital Operative as part of the initial Magento website setup.)
- If you're a Pagerank junkie; it's been known to create "siloed" pages, which means that removing the link will not pass back any link juice to your root page that it typically internally links to. So you think you're helping when you're hurting yourself.
- Avoid dilution of your own Link Juice - In areas like blog commenting, forums, etc. (You know the most common places SPAMMERS hit you.)
- Rel="NoFollow" does not stop the search engines from crawling, it just stop your link juice from getting passed on. (Refer to the following post at SEOmoz on Building Faceted Navs That Don't Suck)
- Robots.txt - this is the right way to omit pages from the search engines
- Canonical URLs - Thank you Google for giving us a way to let you know that the duplicated product pages in our Magento websites are just alternative versions of each other. Pick your URL Methodology and get Canonicalizing!
- Rel="Next" & Rel="Previous" are here - These will allow you to tell the search engines that your Paged navigation is legit and again, not duplicate content. (Another free link from Google showing you the light about this - read more)