It keeps the PR on your site and doesn't transfer it to the affiliate. I usually nofollow all my affiliate links...and links to any "affiliate content" on my own sites. I don't want the search engines seeing a bunch of duplicate content on my sites.
Google will still see the content and index it, it just won't consider the link as a vote for the content.
It's a good practice to use NoFollow tags on affiliate links. Just to play safe, not only because of the PR juice.