Do-Follow is an Attribution Which indicates To Search Engine To Follow a Certain Link. For Example Someone Link your Website in His Blog and He give it Do-Follow Attribution then Search engine bots will follow your website.
No-Follow is also an Attribution which indicates to Search engine to Not Follow a Certain Link. And the Explanation is same as Do-follow.
Now the Question is that, Should we use Do-Follow Or No-follow? If you got 5 back links from Do- follow links then the page rank of the linked website will be transfer to your blog And if it is of No-follow then nothing will be transfer neither PR Juice nor SEO Bots.. But you will get visitors and popularity.. In my Opinion, if you want to link your website on other blogs/site. Then use do-follow attribution. Always make outer links on your blog no-follow.
How to make outer links or back links no-follow:
I guess you don't need to worry about it. If you are using Blogger Platform then you don't, your template will handle it automatically, or add ( rel="nofollow" ) attribute in html coding after outer link...