Matt Cutts, Google's head of search spam, posted a video yesterday on the question of, "can nofollow links hurt your site?" The answer is no but there is a "corner case."
If you absolutely spam links in a way that is so evasive and so annoying that people know you by name, then Google may take action. Even if the links are nofollowed, Google may take action against very large scale abuse of links.
It is a way for Google to go after spammers who are harming sites and encourage them not to.
Here is the video so you can listen to it yourself.
Forum discussion at Google+.
