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Here is a quick summary of the two:
Dofollow - allows the site to pass PR on an outgoing link, thus counting as a vote for the quality of the site in the eyes of google
Nofollow - sends signal to the bot that the link is not vouched for so no PR is passed on. Even with a link being "nofollow", the bot still recognizes the link as valid.
There are tons of resources for this on the net. I suggest you search for them if you want to know more.
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