Why not No-Follow links for post written for contests?

Since the contest rules do not specify anything about the link being do follow or no follow, I think that the entry will not be rejected if the link is no follow.

Coming to the unnatural links part - On an average, a contest gets around 150 entries spread over a period of approximately 30 days which gives 5 links per day. I feel that this is not too big an amount for Google to penalize those sites. And people frequently post reviews about various products with links to these sites regularly. So, the new links frequency doesn't change much because of the contests.

5 Links per day is not unnatural if the page has already been getting similar number of links everyday. Forum/Comment links are not given equal weightage as natural links from within blog-posts. But if it gets 5 links per day suddenly (with that number increasing drastically on the last few days of contest-submission), it may/may-not look unnatural. It's still a risk for everyone involved. 

Oppsss... My blog is having way more links point out than people pointing to me.. But didnt get any warrning from Google yet regarding this though

Here, we are talking about links to the sponsor's site. Why did comment links come into the picture?

I am not talking about comment links..

I am talking about links in my blog itself..

@ Hunky My query was meant for Destination Infinity.

I realise how important it is to add an @ sign in each of my replies!

If you give 'no-follow' link for contests then would it act as proper backlink for your contest sponsors? If 'no', then what for are they conducting those contests?

Conducting contests for links is akin to getting paid links, which is a very risky SEO game. On the short-run such strategies might seem to work, but on the long run, they hurt. We have seen this in Google Panda & Penguin updates. Secondly, links are valuable only if they come from good (high PR) sites that write on the same topic. Most of the personal blogs in this network are neither niche blogs nor do they have a good PR (Page Rank). 

I don't think sponsors are conducting contests for links. They are doing it to publicise their products/services through bloggers and their followers. If 150 bloggers write about a product, imagine how many of their followers will see it. Besides, many more readers come through search engines and all of them will be exposed to the sponsors product/link. Over time, sponsors achieve a great reach and a good online visibility. 

Ahh... true... Summer heat is driving me nuts