The most up-to-date info here so far seem to be what SemAdvance wrote.

It seems that some of you don't read Matt Cutts's SEO/Google blog. Why not? It is a great source of confirmation of what is real and what is junk. Matt doesn't give away huge secrets, but he helps filter out the noise.

Reciprocal linking is not as effective as it was, and in some cases may actually be counterproductive. If you have to swap links (and let's face it, most of us do to an extent) then only do it with relevant sites - and avoid swapping with sites that show indicators of penalties (grey PR bar, no pages reported in indexes).

That's where links can hurt you rep - when you link to irrelevant or bad sites.

Do link out, but do it to trusted, relevant authority sites. And don't worry about that PR-leakage cr*p. A small number of carefully selected, relevant OBLs is likely to do you more good than harm.

Kevan, don't worry too much about who links to you. At the SES conferences the crawlers' reps have said time and time again that they understand that is outside your control. You are unlikely to be penalised for IBLs, but bad ones simply won't help your SEO at all. A possible exception may be a very obvious huge batch of bought links. And, of course, a reciprocal/swapped link with a bad site will reflect badly on you as you will have made the decision to link back to them.

The tiresome truth is that good content and services are amongst the best link-building tools.

If you have to swap, then use several different sites if you have them (preferably on different hosting) to spread the load. But keep it relevant.

Buy good links if you can, but not in bulk (we nearly made that mistake a year or more ago, but posters here showed me the error of that path!).