Friend 2: (thinking) Jim can see me talking to this girl...sweet. he's nodding and raising the eyebrows. sweet (nods back)
Friend 1: (nod of acknowledgement towards friend 1) (thinking) Mmmhmm. That girl is hot.
The only acceptable response to a nod of acknowledgement is another nod. If you speak, you have broken the point of such a gesture.
(1) Walking past a friend to class
(2) Catching a friend's eye across the room to say "hi" without verbally saying it
(3) Giving approval of a friend's actions
2. Dale walks down the street. He passes some guy, and they exchange a nod of acknowledgement.
3. As Lars stands in line at the hardware store scoping out the others waiting in line, he inadvertently catches the eye of Sven, two isles over. They simply exchange a nod of acknowledgement and look away.
The *downward* nodder looks up to the subject, displaying submission to them. It therefore signals respect.