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Matt Cutts: This is a little bit of a “have you stopped beating your wife” type question in that there is an assumption baked in that is not necessarily true. Specifically you are saying, “many webmasters are linking only in No Follow and that’s killing the natural way of links.”

Whenever we look at the percentage of No Follow links across the web it’s actually a very, very small single digit percentage of the links on the total web. I know that the perception whenever people are trying to get backlinks everywhere they are looking they are finding a No Follow but in general there is a vast, vast, vast number of links on the web that are not No Followed.

I certainly do not expect that Google will penalize people who only link out with No Follow. If someone does not want to link out and wants to use No Follow that’s their choice. Now if they choose not to participate in the conversation then people may not link to them as much or they might not find that they have as good an experience for users or for whatever reason they are not willing to link a lot of times they are not willing to link to other sites that are good for users as well.

But the fact is No Follow is still a very small percentage of links on the web and that’s after having been introduced for five years. And I wouldn’t be more surprised if we tend to see more sites grow more nuanced. So as websites build up trust in particular individuals they might say, “okay I’m all right to link to that particular person.”

So in Noll for example, the links started out as No Follow but once they started to see people who were more trusted some of those links in Noll they removed the No Follow and I think that is a good policy that a lot of sites could follow.

So please don’t take a look at trying to get links and assume that all links on the web are No Follow because that’s definitely not the case.