@Leslie Nicole - Actually, if you set up your wordpress permalinks properly -- wordpress itself does a great job of making your links SEO friendly. Pretty Link is more about making your links easier to proliferate. It helps your SEO by allowing you to create short links to your internal pages and external links that use your domain name. The idea is that not only is Google seeing these links but they're more memorable (since your domain name is a major part of your brand) to the humans who are clicking on them.

With internal pages, this comes with a caveat though -- as with any link shrinking service, if you aren't using a 301 redirects or have canonical links setup on your internal pages, you could actually stifle your SEO efforts. This is because Google won't know which link to count towards pagerank so it may split the pagerank between the short link and your page. I've talked about this several times on my blog. The safest bet (whether you're using this plugin or not) is to see if your theme is creating canonical links and if not, install Joost de Valk's canonical link plugin -- it will take care of this for you.

With that said, I get feedback every day from people using this plugin who are finding that it really helping their marketing efforts, both through SEO and building awareness for their brands. These links can be re-tweeted or just copied directly, used by other bloggers or automated services which build some back links for you. Any way you slice it, it's a good idea to use links from your domain name when you can ...