On the Web, a DoFollow link to a website is like a vote for that website. Inbound links, or links from a different website, are something that search engines really pay attention to when deciding where to rank a web page in search results. Inbound links from a number of authoritative websites tells search engines that the target web page is important.
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It’s best to leave links DoFollow unless you don’t trust the site you’re linking to, or for some reason don’t want people to find it in search results. A log-in page, for example, isn’t really a page people search for.
If you’re hosting a paid link, such as an ad, you should make it NoFollow. It can also be a good idea to make links in user-generated content, such as comments on blog posts, NoFollow.