Friendship

Friendship is common both in The Sims and The Sims 2. When two Sims' (daily) relationships are over 50, the Sims become friends.

Becoming friends with another Sim allows greater social interactions, which are less likely to be rejected by the receiving Sim. This means that gaining a higher status relationship (Best Friends, Crush, etc.) is easier to achieve.

Friendships are slightly different in The Sims 3 since there is only one friendship bar not two (short and long term) and your friendship status changes as you move up the bar (from stranger to acquaintance, to friend, to good friend, to best friend - and into romance if you wish).

Friendships do still decay but it seems to be slower, it is difficult to tell since there is no longer a number out of 100 to look at just a bar that fills up.

However if you have a friend and the relationship decays below friendship they now become a "distant friend" so you don't lose them as a friend. I don't know however if the friendship can decay below that level or what it becomes if it does.