Are nofollow links fatal to SEO?

A nofollow link is generally regarded as fatal to SEO, but is this true? I've had my doubts for a while now, especially when it comes to the impact of links from respected sites that automatically nofollow all links (e.g. Twitter).

I have no hard evidence that some nofollow links are less fatal than others, but I can say I'm not the only person who wonders about this. I recently found this article by Eric Enge in Search Engine Watch. It says...

Just because a link has the nofollow attribute doesn't mean that it counts for absolutely nothing. Certainly, nofollow links in blog and forum comments will count for nothing...

However, other sites implement nofollow policies on all external links, such as many U.S. government sites. These sites are trying to identify resources that they consider valuable, even though they nofollow the links. The search engines could choose to associate some value with these links anyway. Remember, the goal is search quality.

The article goes on to speculate about 'hot' discussions in Facebook and Twitter, and wondering whether a huge upsurge in chatter impacts on search engine results (albeit temporarily).

I think there's a very good chance that search engines do take nofollow links into account. It may even be the case that nofollow links on some Blogs still count for something in Google (the company that introduced the nofollow attribute).

In fact, I think the nofollow system contains the seeds of its own destruction. Many webmasters believe they're rewarded for nofollowing links that lead to external sites. As word gets out, more and more links will have this attribute added to them. If all links include the nofollow attribute, how can search engines use them to calculate quality?

Answer: They can't, and will be forced to disregard the nofollow attribute.

Please understand, I have no inside knowledge of any search engine. This is merely speculation on my part. I read the article on Search Engine Watch, and was reminded of my own thoughts about the apparent value of some links despite their 'nofollow' status.

Perhaps it's time to stop using URL shortening in Twitter?