Documentation
Briefly, why this plugin is needed.
PageRank, or link weight, flows throughout your site like water, going from page to page, post to post, thread to blog to post to memberprofile through links. It flows in circles in a closed system.
When external links are added the system opens up, and water leaves your system to these third party websites. You now have less water.
On a forum page with a thread with 25 posts there can easily be over a hundred external links from signatures or post bodies. If you also have 100 internal links you're losing half of your water on that thread page. If such a situation is typical for your forum you're more or less losing half of your water for your entire site. Which means, simplistically, that if you implemented this plugin you could almost double your water (through conservation). That can have a large affect on both rankings and the depth to which Google will crawl your site.
The above is a simplistic explanation of a complicated process, but it should illustrate the drastic difference external link management can make. It is so important I believe vbulletin was officially going to code nofollow into 4.0, but now with nofollow not really helping you need something else, like this plugin.
Savings
The redirect page shows your forum template including header & footer for a reason. The amount of link weight this plugin will save your site is found by dividing 1 by the number of total links on the redirect page for a non-logged in user.
If you have 10 links on the page, 1/10 = 0.10. 10% is lost, you're saving 90% of what would have been lost without this plugin.
If you have 20 links on the page, 1/20 = 0.05. 5% is lost, you're saving 95% of what would have been lost without this plugin.
If you have 50 links on the page, 1/50 = 0.02. 2% is lost, you're saving 98% of what would have been lost without this plugin.
And again, if you merely use rel=nofollow on external links (like many sites have done before now) you're still losing that weight thanks to what Google recently changed as per their announcement in June 2009.
So, if you install this plugin and on a forum thread page you've got 50 internal links and 50 external links, you're losing 50% of the weight on that page to the redirect page from the plugin (the weight is split between all links). However, if you've got 50 links on the redirect page, the redirect page is then salvaging 98% of that 50% back to your site. So in the end you only lose 1% of the link weight that was present on the original thread page, and no matter how many users post, how many links they have in their signature, in such a situation it'll be impossible for you to ever lose more than 2% of the weight of that post. They could post a million links and you wouldn't lose more than 2% of your weight. That is the beauty of the system.
The other beauty is that because there are valid reasons to do this anyways, irregardless of search engines, someone would be hard pressed to describe this as anything but white hat seo. As opposed to cloaking or otherwise hiding your external links.
Install
Do the file edits described in the readme file.
Upload externalredirect.php to your forum root directory.
Install the plugin xml file using VB's plugin manager.
Visit vBulletin Options ==> vBulletin Options and scroll to the bottom of the global option list to turn on the plugin and edit settings.
nofollow settings
The nofollow setting in the admin is to set whether or not the external link on the redirect page will use nofollow. This is recommended to be on. This does not set nofollow to be applied to the external links where they are first visible on your post pages and within signatures, this is to be avoided as it can hurt you which is why this hack exists.
Whitelist Settings
To be safe you should add your domain to the whitelist after install.
The whitelist is a wildcard search just like VB's built in IP and EMAIL based banning.
Entering
www.example.com in your whitelist would match "www.example.com" but not "example.com"
So, to add an entire domain to the whitelist, it is best to keep it in the format of "example.com" which will match to "www.example.com" and "example.com" and "blog.example.com" and any other such domains.
Caching
After installing you may need to reload various caches to get the redirects to show up, to test try making a new post that would not have yet been cached.