Does anyone know if using Add-on Domains to host several websites on a single hosting account will have any negative effect on SEO? Does Google penalize such practice since the websites will have the same IP addresses? Thanks!
Google is not interested in your IP number, unless you do something dogy like cross linking them. Same with Yahoo! MSN etc.
It completely depends on how many websites you add to your "link network" and how you link between them. I've seen major spam networks that participated in cross-linking between hundreds of domains fall in a matter of days because first google banned the involved IPs and yahoo followed a couple of days later. However this mostly does not go for usual shared hosting... I'd probably interlink up to a dozen of domains if I had to but it kinda depends on the involved sites. Never thought about it before really.