Google "uses links as a signal when determining the relevancy of pages and to find new pages to crawl", but reliably follows only <a> elements with an href. Descriptive anchor text ("ghost peppers", not "click here") helps people and Google, and "every page you care about should have a link from at least one other page on your site."
Linking out is safe: external links "can help establish trustworthiness (for example, citing your sources)." That followed outbound links "leak" PageRank is unconfirmed, as is any ranking effect of broken links. Use nofollow only for sources you distrust and sponsored for paid links (nofollow, sponsored and ugc).