It's generally used so that spiders (Google) don't follow the links and pass your PR and sites influence onto the merchant page, or associate the affiliate site with the merchant - everyone has different opinions on whether Google penalises us or not, but since there is not a lot of seo benefit in these links it doesn't hurt to hide them.
To be honest I'm not sure if it works - it'll stop the spider following the link, but if the spider is looking for affiliate links/code then it'll still spot it. A more complete solution is to use these nofollow links to link to a redirect script.
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Crazy...
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