Yes, nofollow attribute simply tells the search engines not to pass the link value to the destination site.
you are not obligated to pass any link juice to them. you are sending them the leads for which you are earning commission, thats the whole deal. besides, most affiliate links are complex with trtacking id/cookie so even with dofollow links, the main site is not getting any link juice. the visitor ends up on a landing page which may or may not even be a part of the main site
Don't ever do this. This goes as a paid link. You're getting paid (though on a comission basis) but still get a monetary incentive to link out to a site. If Google catches up on you and if your site is big enough you'll get a penalty. Frankly I didn't believe these tales about Google penalizing sites until I saw this happen. And it's the site selling links that gets kicked out of index, not the one buying links. Believe me, the merchant would rather see sales coming through your website than a dofollow link that can jeopardize these sales. Generate sales and this will be enough of a thank you.
Nofollow links are still searchable. The only difference is that the SE bots of Google don't count them as backlinks.
I can't say that I agree with this... Affiliate links are definitely NOT viewed the same as "paid links". Paid links are bought and paid for with the explicit purpose of making another site rank. The buyer specifies the EXACT link text they want used for the link and the URL where they want it. The site selling the links (which is almost always the one getting penalized) receives payment generally before the links even go up and then in order to keep the links up, they have to continue to receive payments from the buyers. Just because you have affiliate links on your site does NOT mean that you will ever be paid a dime from the advertiser. There is NO guarantee that a single customer will ever convert or that the affiliate will EVER get a single penny from the link. Furthermore, the site that your affiliate link points to has NO say in what link text you use or what page it goes on. I have never heard, personally, of an affiliate marketer being penalized for violating the Google Webmaster Guidelines "paid links" policy. However, it is true that Google does not like affiliate landing pages and thin affiliate sites showing up in their SERPs, but that is more because those types of pages tend to add no valuable, additional information about the product other than the canned product description. You can have an affiliate site that ranks well and remains in the SERPs as long as it has useful information that searchers/consumers are looking for relative to their search phrases. I have read their Webmaster Guidelines many times and am a top contributor on Googles Webmaster Help Forum and I've never seen John Mu or anyone there (or Matt Cutts for that matter) explicitly say that affiliate links that are followed are a violation of their guidelines. If you have a site about some topic and linking to a place where someone could buy a product related to that topic and that link provides some added benefit to your user then that would likely withstand a manual review by a Googler. As long as the link is relevant to the topic of your page/site and that link provides your user a benefit by helping them find something they are looking for then it is irrelevant that it ALSO provides the target of the affiliate link with a little PR. All that being said, I generally do NOT follow affiliate links but using a different technique and for a different purpose. I like to track how many clicks I am getting on my site for various affiliate links. I want to figure out which placements on my site are working the best. So all of my affiliate links go through a redirector page first where I record the click and a tracking code to indicate where the link was located on the site (page and position on page). The redirector page records all of my click tracking info and then redirects to the "real" affiliate link. I have the redirector page blocked by my robots.txt file which essentially makes it a NOFOLLOW, NOINDEX. So my affiliate links look like: http://www.mysite.com/redirector.php?placement=12&url=URLEncodedRealAffiliateURL