All of the major search engines have acknowledged support for rel="nofollow"
From Wikipedia:
While all engines that use the
nofollow value exclude links that use
it from their ranking calculation, the
details about the exact interpretation
of it vary from search engine to
search engine.
Google states that their engine takes
"nofollow" literally and does not
"follow" the link at all. However,
experiments conducted by SEOs show
conflicting results. These studies
reveal that Google does follow the
link, but does not index the linked-to
page, unless it was in Google's index
already for other reasons (such as
other, non-nofollow links that point
to the page).
Yahoo! "follows it", but excludes it
from their ranking calculation.
Bing respects "nofollow" as regards
not counting the link in their
ranking, but it is not proven whether
or not Bing follows the link.
Ask.com also respects the attribute.
