overloading friend operator<< for template class

You declare operator<< as returning an ostream&, but there is no return statement at all in the method. Should be:

template <class T, class U>
ostream& operator<<(ostream& out, Pair<T,U>& v)
{
    return out << v.val1 << " " << v.val2;
}

Other than that, I have no problems or warnings compiling your code under Visual Studio 2008 with warnings at level 4. Oh, there are the classical linker errors, but that is easily bypassed by moving the template function definition to the class declaration, as explained in the C++ FAQ.

My test code:

#include <iostream>
using namespace std;

template <class T, class U>
class Pair{ 
public:
    Pair(T v1, U v2) : val1(v1), val2(v2){}
    ~Pair(){}
    Pair& operator=(const Pair&);
    friend ostream& operator<<(ostream& out, Pair<T,U>& v)
    {
        return out << v.val1 << " " << v.val2;
    }
private:    
    T val1;
    U val2;
};

int main() {
    Pair<int, int> a(3, 4);
    cout << a;      
}

Simple inline version:

template<typename T> class HasFriend {
    private:
        T item;
    public:
       ~HasFriend() {}
       HasFriend(const T &i) : item(i) {}
    friend ostream& operator<<(ostream& os, const HasFriend<T>& x) {
        return os << "s(" << sizeof(x) << ").op<<" << x.item << endl;
    }
};

Revised template version:

template<template<typename /**/> class U, typename V>
ostream& operator<<(ostream &os, const U<V> &x) {
    return os << "s(" << sizeof(x) << ").op<<" << x.item << endl;
}

template<typename T> class HasFriend {
    private:
        T item;
    public:
       ~HasFriend() {}
       HasFriend(const T &i) : item(i) {}
    friend ostream& operator<<<>(ostream&, const HasFriend<T>&);
};

You want to make one single instance (called "specialization" in generic terms) of that template a friend. You do it the following way

template <class T, class U>
class Pair{
public:
    Pair(T v1, U v2) : val1(v1), val2(v2){}
    ~Pair(){}
    Pair& operator=(const Pair&);
    friend ostream& operator<< <> (ostream&, Pair<T,U>&);

private:
    T val1;
    U val2;
};

Because the compiler knows from the parameter list that the template arguments are T and U, you don't have to put those between <...>, so they can be left empty. Note that you have to put a declaration of operator<< above the Pair template, like the following:

template <class T, class U> class Pair;

template <class T, class U>
ostream& operator<<(ostream& out, Pair<T,U>& v);

// now the Pair template definition...