Thanks for the reply. I guess i'm even asking myself more questions now. I find a lot of similar setups such as this one I've attached. What is this accomplishing?
Note: the TIP120 aready has a diode from the Collector to the emitter. See: http://www.adafruit.com/datasheets/TIP120.pdf
Diode goes across the inductive load (fan) not across the transistor. Diode goes for +12 to Collector, same as the fan. Make sure the Cathode (negative) side goes to +12 and the Anode (positive) side goes to the Collector.
He has said what you should do.