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I know you're supposed to use rel="nofollow" on outgoing ads, to keep from passing link juice, but what about internal ads? We have a number of links with pictures that I consider as ads to other parts of our site (usually to a sub-domain). Should I rel="nofollow" them? With google's most recent algorithm change this month, I feel like some things have changed.

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No, you should always avoid* using use rel="nofollow" on internal links. Matt Cutts wrote about this a while back.

Of course, things might change in the future, but as of today, that's Google's advice.

*As per @Mike's comment, "avoid" is a bit strong - "don't bother with" is probably more suitable.

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    you've taken Matt Cutts's statement "I wouldn't recommend it" and transformed it into "should always avoid". I'm pretty confident that it was a recommendation, not a rule. There are PLENTY of reasons to use no-follow on internal links (links to dead-end pages, login pages, forced-order anchor-text linking etc), but for most webmasters it's not of any concern. Apr 26, 2011 at 0:43
  • @Mike Perhaps 'should always avoid' is a bit strong in the sense that it's not going to get you booted off Google. But Matt Cutts is clearly saying that rel="nofollow" on internal links is at best pointless, and can harm your SEO by 'evaporating' your PageRank. Pages that you don't want indexed should just be listed in your robots.txt.
    – Dan Blows
    Apr 26, 2011 at 0:53
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    I guess we are not going to agree some interpretations, but that's half the fun. Also, I would recommend meta robots="noindex, follow" rather than robots.txt, as it has been shown that robots.txt doesn't prevent indexation, just crawling. Apr 26, 2011 at 7:25
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    @Mike Hmmm, interesting I hadn't noticed that before. Useful link should someone need it: seobook.com/robots-txt-vs-rel-nofollow-vs-meta-robots-nofollow
    – Dan Blows
    Apr 26, 2011 at 11:27

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