Don't Be a Spam Source (Part 3):
Properly Configure Mail Relaying
In addition to discouraging local users from generating spam, you need to discourage remote users
from using your server as a tool for distributing spam. Nobody likes spammers, and the spammers
know it. They do their best to hide the true source of the spam by relaying their junk mail through
other people's servers. If your mail server allows relaying, spammers can make use of it.
To discourage spam, the default configuration of sendmail properly handles local mail, but does not relay messages for any outside sources. This is just the opposite of versions of sendmail before release 8.9, which relayed all mail by default. If your system runs an older version of sendmail, you should upgrade to get the full range of anti-spam tools.
Blocking all relaying works in most cases because most systems that run sendmail are not mail servers — they're desktop Linux and Unix systems dedicated to a single user. Because the user's mail originates on the system that is running sendmail, the mail is handled as local mail, and relaying is not required.
Blocking all relaying doesn't work if the system is a mail server. Most of the mail that a mail server delivers originates on its clients—these might be Microsoft Windows PCs that don't run their own sendmail program. Blocking relaying at the server causes the client to get an error when trying to deliver mail.