As halfmexi mentioned in a thread on directory submission,
Google has updated its Webmaster Help Center - Link Schemes.
Notable Link Schemes which are highly discouraged:
Not exactly big news, but I thought this was worth its own thread.
- Links intended to manipulate PageRank
- Links to web spammers or bad neighborhoods on the web
- Excessive reciprocal links or excessive link exchanging ("Link to me and I'll link to you.")
- Buying or selling links that pass PageRank