my recommendation for using affiliate links would be to obfuscate the links, and put them and hit them up with a noindex,nofollow tag.
Yes, of course use nofollow /i do as i have them sitewide/. But obfuscating them won't work for all, as some affiliate programs do not include Aff. number/ref. ID, and through services like tinyurl, they won't track referrer and I doubt they will write the correct cookie on the buyers' pc's... The nofollow tag is working perfectly for now
The way I do is, I redirect all outgoing links to a sub of my domain as sub.domain.com sub.domain.com has robots.txt barring all search engines. Also I use nofollow for linking. On actual redirect page, i redirect using javascript so that no bot can follow the link.
You should not shorten affiliate links on your site since I think many affiliates do not allow this and Google will definitely penalize you for hiding these links. Also, people will less likely click on those links since they do not see the real domain name of the affiliate. It has been stated before that Google does not like pages with too many affiliate links and will give them lower ranking as a result. If you have quality and unique content on your site with a few affiliate links, then you should not have any problems. Having 10 affiliate links on a single page are sure to make anyone lose interest in your site since the only thing it provides in this case is a link to the affiliate and not a lot of useful information.
So what would you say is the most "Google Friendly" method of linking to affiliates? Php-Redirect? (That would be my answer) If you're setting up an entire affiliate store there's no way to truly avoid this.
On second thought: I just read that entire page and every comment. Here's the very last comment. Well, Barry, it looks like you've launched a new SEO myth. The sites that were penalized were penalized for selling links. Now we're going to have put up with 2 years of SEO blogs talking about putting nofollow on affiliate links (which is not necessary). This is why the typically bad analysis in the Google Groups so disgusts me. It gets picked up and passed around so quickly.
Yes, putting the affiliate links under nofollow tag is a pretty god idea. That's what I am doing in my blogs and it reduced the outgoing link count to 12%.
i have experienced this, i linked a couple of clickbank products from one of my inner pages a few weeks ago and i experienced a fall in my serps, however continual link building will rectify the problem