thanks for your post. You have some right things , really it is very important. Working algorythmically can create wrongs; especially for this subject. But I just had the same thing " Google can't know whether a link is paid or not unless they see paids' invoice. "
Nor do they care LOL ALL google care about is relevancy of results. Google have massive data about social networking from orkut. They have mountains of data on link patterns that they can cross refer to. They can tweak their algos based on this, as social networking patterns in Orkut will likely be no different to patterns in the natural linking of web pages. Anything that steps out of that pattern can then be flagged. This is just me letting my Sunday mind run off a little.
Have you not been paying attention to AdSense ads on a forum like this? Watch how quickly they respond to changes in the direction of a thread and any doubts you have about Google's ability to determine content and relevancy should vanish completely. Now, note to everyone reading this thread: Please go back and re-read all of Old Welsh Guy's posts here. Carefully this time. Okay. Now go back and re-read them all one more time. Fix the concepts in your head.
Google are always saying that they reward 'natural linking' and for them to keep saying this we have to assume that they are pretty good at spotting natural and unnatural links. The points raised in this thread by Old Welsh Guy about google spotting paid links can equally be applied to making sure your reciprocal or 3 way links are getting the maximum value. Rather than getting site wide footer links (which could never be natural could they?) or 'orphan' links (links just stuck on the page with no relevant text nearby to justify them) you should concentrate on building links within the content of the page for maximum value. Even if these are reciprocal at least they look like natural links. I don't think google care about whether money may have changed hands as much as they care about trying to algorithmically reduce the impact of unnatural links - paid or unpaid.