I don't know if anyone else is seeing this but what I see in this update is (and this may explain all the spam sites that show up again) that sites in my theme that I have UBL's to show up ABOVE me. Is this the new way Google is going to do it then I am going to use rel=nofollow on ALL UBL's om my sites. I can see that they must have changed their way of thinking and have removed some things in their algo that would make the root of the links less important. Let's say I have a site about hotels, a review site if you will, and I have UBL's to hotels that I like or dislike. We all know that there are tons of sites like that and if everybody links to hotel sites, then all hotels that has been reviewed and have UBL's one day will have more links than your own site, hence they will get a better ranking than your own site. Now, what is Google going to do, like in the case with wkki, when we all, except for spam sites, are going to use rel=nofollow? They will have no way of ranking sites anymore even though I read somewhere that the rel=nofollow doesn't mean that they don't follow the link anyway and look at it and evaluate the site. Looking at the results over the last week or so tells me that this is the results they are going to use since it gets worse every day for my sites and I don't foresee any changes to the sites that have lost their rankings this time. Hopefully I am wrong. Any other ideas?
Oh... Outward Bound Links. I thought maybe you meant Undeserved Back Links. In which case, rel=nofollow on those links would make sense.
Your right, it is stupid. Most sites will link to other relevant sites either for reference purposes, or for content. When you link to someone else, your essentially voting for the other page. That link you gave the other site directly helps your competition. As you know, most people only want to help themselves and stick thy neighbor. So they will use a tag telling search engines not to follow outbound links. This way they still pass the content to their visitors without helping the other site. (good business) Essentially, your rankings will depend on the niceness of other webmasters in your theme. Not many people are nice to strangers, so any intellegent webmaster who wants to be "ontop of his competition" will not allow Se's to follow the links. The way around this is to befriend your competition and make an agreement to link to each other in a friendly way, but google obviously frowns upon this. As it stands, the only way to gain popularity is to hope other webmasters ,out of the kindness of their heart, allow se's to follow outbound links. Theres no way to win
Seriously, though, if we start using rel=nofollow everywhere, only spammers will have links that count for something... I look at it as a last-ditch effort, when a blog or site like wikipedia gets spammed so much it can't keep up. That would be a different level for everyone, how much time they spend (and how often) deleting spam messages and links. I doubt your link to them is enough to push their site past yours in most instances. Google has been pretty buggy of late, however, so anything is possible. In your example, if the outbound linking page does not have alot of content, if it's mostly images or anchors alone, simply adding more text (describing the site?) should help level the playing field in the serps.
One of the things Google has implemented lately is a penalty for OBL to bad sites but don't think link exchanges have worked for a while. Mostly one vote out for one vote in. There are those who believe links out to authority sites can help you. But it is mostly about inbound links. As a matter of fact though Matt Cutts and others at Google will tell you not to be obsessed with links I know of a URL that ranked on the first SERP for one of its keywords for a couple months after the site was taken down. It was a default PLESK page. Talk about no content. I can't imagine what was keeping it up in the rankings if it wasn't links.