This question was asked recently at one of the Forums that I participate in and I thought that the reply I gave might be of use here as well.
The answer to this is very straight forward. One of the most important factors that appears to have emerged in the latest Google “Algo” update was that they were now looking at the breadth, strength and variety of the inbound links that appear in your back links “landscape”. The old days of just getting loads of so called “dofollow” anchor links from one site / IP no longer cut it.
Now whilst folks have caught on about the IP diversity (still not to the extent they should have) people still haven’t fully appreciated the fact about “Link Diversity”. By this I mean that Google are looking now for a bank links landscape that as fully replicates that created by a human as possible. To this end they are now looking to see a variety in styles of links such as a mix of dofollow / nofollow, directs, indirects, typos etc in fact anything that looks like it could have been created by hand rather than an automatic submission bot.
At the same time time there appears to have been a re emergence of a concept they first looked at a few years ago called “Trust Rank”. This looks at the site that the inbound links originate from and assesses the “trustworthiness” or “authority status” of the site as it lies within your back links landscape. This is where EDU sites really come into their own and even if they only provide “nofollow” links. As most of these EDU Domains are virtually coming down with authority back links within their own profile, a lot of this is passed on in a way that is quite different to the old and now defunct (in reality) concept of Page Rank.
So to sum up (before I go too much about this) nofollow links from EDU domains are really valuable in a number of hitherto misunderstood ways. There are also a number of other factors that give benefit as well.
