Can I be penalized for NOFOLLOW links?

An interesting question, and for those of you reading who aren't sure what the NOFOLLOW attribute does, I recommend What's the NOFOLLOW attribute? as background reading.

I appreciate your concern here, but I assure you that this is not a threat and is not anything to worry about, Steve. If nothing else, realize that blog comment systems now automatically add nofollow and that good bloggers (imo) add comments of their own to nurture the dialog. Wouldn't it be a bit, um, bizarre for me to be hurting my own PR or ReputationRank (coming soon to a Google algorithm near you) by commenting on my own articles? :-)

There's a larger issue here too, in that Google and similar search engines can't penalize you for links that point to your site. Otherwise I could cause you no end of grief by picking a really heinous site, say a hate organization that's been banned by Google, and then adding a bunch of links to your Web page. If links out of your control could adversely affect your ranking, you'd be up a creek and, generally, malicious (or should I say "overly competitive"?) business people could then attack their competitors without any recourse.

As a general rule of thumb Google doesn't penalize you for inbound links.

I hope that puts your mind at ease.