Compilation of SEO blogs discussing this same controversy. Some claim to have received confirmation from Google that this is in fact the case. Perhaps Google Webmaster will be confirming this in the next few days - now that it has become leaked
What they are actually trying to stop is people wanting to buy search engine rankings, which seems to be the case with most of the link sales these days. After all why would the page rank would take precedence over traffic for some one who is actually trying to buy advertisement for his/her site?
No one should be banned for indulging himself/herself into money making legal business activities. Even google sell sponsored spaces and search results. I don't see anything wrong in it unless google wants to monopolise the market.
Google just wants to keep their algorithm listing the most relevant websites on top of search results clean. Since it's based so much on links (dare I say pagerank? ) Google wants to see only real, natural links. Which is of course a dream. I assume they are frantically trying to find another type of algorithm that won't depend so much on links.
No one is being banned, their sites are just being penalized. Most of them are still in the Google index, they're just not ranked as high as they used to. And Google isn't stopping them from indulging themselves ... they're free to do what they want with their sites and Google is free to do what it wants with its own site.
You be the judge. Is this just a coincidence or factual evidence? http://blogoscoped.com/archive/2007-10-24-n36.html http://www.searchenginejournal.com/google-drops-pagerank-for-many-sites-paid-links-or-new-algorithm/5890/