The dofollow FAQ

This is an attempt to refute the arguments for applying nofollow to external links.

If we get rid of nofollow, won't the spammers, responding to market incentives, overwhelm the communities' ability to keep their spam under control?
Not necessarily, because there also exist market incentives to revert spam or to otherwise get rid of some of the rewards for spamming. E.g., suppose Wikipedia gets so much spam that Google starts awarding a high pagerank to the relatively useless and/or harmful sites the spamlinks go to. Now Google's customers will have a reason to be upset about the unhelpful search results and to instead use competing search engines that don't give Wikipedia's external links so much weight. This would prompt Google to not weight Wikipedia's external links so heavily or to find some way to sort out the good external links from the bad.

Also, some promotional editors, especially the ones with a long-term perspective, might revert other spammers in an effort to build up their reputation in the community and to improve the quality of articles they want to add promotional links to. It would be in the interest of, say, a major software company to revert edits mentioning non-notable software companies, if those would dilute the influence of the mention of the major company. The market has always demonstrated the ability to stay ahead of the spammers.

Of course, Wikipedia is hostile to promotional editors, especially paid ones, and wants to ban them. Other communities might not be so against them. They might see a little promotion as okay as long as the editor is, overall, a good contributor. Its understandable that the small wikis might have a different attitude toward nofollow given that they are the little guy who has to struggle to attract pagerank to himself and the sites that he favors.

A small wiki is like a small town in that most people know everyone else; at any rate, those who watch RecentChanges (as is the norm on smaller wikis, rather than watching a relatively small list of watchlisted articles) gain familiarity with the other editors and learn what they're about. Wikipedia, on the other hand, is a top 6 website that never has trouble attracting traffic, and may not have any agenda about driving traffic to other sites; and it's like a big city in that people can come and go without being noticed too much. So, the opportunities for someone to slip spam into articles unnoticed might be greater.

Do search engines even use nofollow?
Information on that varies; see 52617, where it is noted "Yesterday here at Wikimania Yong-Gang Wang of Google mentioned that their general crawling pipeline has a rule that disregards rel="nofollow" on all MediaWiki-powered sites. I would not be surprised if other engines had similar rules." Despite this, most MediaWiki developers seem to still believe nofollow is an important spam deterrent.

What effect does nofollow have on spam?
Nofollow doesn't completely stop spam, and there is no reason to believe it would have any effect on spam that's intended to attract the wiki's visitors to the linked sites rather than to raise pagerank.

What are some proposed changes to how MediaWiki handles nofollow?
One is to stop using rel=nofollow on all external links (42594); another is to add an option to apply nofollow only to external links added in revisions marked unpatrolled (42599).