http://www.google.com/support/webmasters/bin/answer.py?hl=en&answer=66356 Link schemes Your site's ranking in Google search results is partly based on analysis of those sites that link to you. The quantity, quality, and relevance of links count towards your rating. The sites that link to you can provide context about the subject matter of your site, and can indicate its quality and popularity. However, some webmasters engage in link exchange schemes and build partner pages exclusively for the sake of cross-linking, disregarding the quality of the links, the sources, and the long-term impact it will have on their sites. This is in violation of Google's webmaster guidelines and can negatively impact your site's ranking in search results. Examples of link schemes can include: * 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 The best way to get other sites to create relevant links to yours is to create unique, relevant content that can quickly gain popularity in the Internet community. The more useful content you have, the greater the chances someone else will find that content valuable to their readers and link to it. Before making any single decision, you should ask yourself the question: Is this going to be beneficial for my page's visitors? It is not only the number of links you have pointing to your site that matters, but also the quality and relevance of those links. Creating good content pays off: Links are usually editorial votes given by choice, and the buzzing blogger community can be an excellent place to generate interest. Once you've made your changes and are confident that your site no longer violates our guidelines, submit your site for reconsideration. ----------------------------------------- Just to outline Googles stance
google will not penalize relevant link exchanges. however if you have 50 unrelated outbound links on your site, well, that's another story. also inbound links from linkfarms are pretty much worthless
don't go for irrelevant & huge links. choose wisely & naturally. don't be panic for links ..it should be natural time proceeding.