Whats the purpose of no follow in SEO? I can't seem to find anything reliable.
The purpose of 'no follow' tags is to indicate to search engines that person making the link does not trust the page being linked to, that the link should not count as a 'vote' for the quality and authority of the page being linked to.
Webmasters saw this functionality as a way to 'shape' or control flows of Pagerank, Google's proprietary ranking analysis metric.
Many webmasters have become overly concerned with the use of nofollow and waste huge amounts of time on using it. In most cases where used for internal PR shaping it is time that is wasted especially if you are using a well known CMS such as WordPress where SEs are very familiar with the site structure imposed by the CMS and already know about legal pages, category pages, archives and the like.
Used externally, it is becoming less and less relevant as SEs become better at seeing web pages in the context of an eco system where linking is both normal and to be expected and where external links are seen as being a good thing for the purpose of enhancing the user experience of site visitors - this is one reason that on my site setups I recommend people to use Zemanta.com to find links out to relevant authority pages. 'Good quality' sites are not afraid to link out and to show that they do so.