Outbound links are links that originate from the seo target site to any other web location. Outbound links can also be links to word documents or images. One should be very careful with outbound links. As of late Google seems to be taking into account the quality and relevance of the linked site for the seo target site. The better the quality of the outbound links the better your site might rank.
One could use a nofollow in the relation attribute to disable some of the outbound links for Google. This can be done in some link trading schemes. I usually do not want to hand out to much pagerank to other sites of low quality and relevance. If you would not want to read or view the site yourself it is probably a bad idea to link it. Your visitors will appreciate you for only suppling high quality outbound links.
