Back in August Google decided to update their guidelines on links within widgets that could be embedded in websites. As you can see if was pretty clear you needed to nofollow all links.
Google have again reviewed their position on embeddable links by changing their webmaster guidelines subtly from:
Links embedded in widgets that are distributed across various sites.
Keyword-rich, hidden or low-quality links embedded in widgets that are distributed across various sites.
This change means that you no longer need to nofollow all links within widgets. What you need to nofollow, and better yet remove, are low quality, keyword rich or hidden links.
This basically singles out spammy links that are getting abused by this method and allowing again for white hat companies to use embeddable widgets.
See the video from Matt Cutts on Embeddable Widgets below:
Blog Post by: Greg McVey