In other words, how does Google view links like: http://www.SOCIALBOOKMARKINGSITE.co... day. Will this hurt my site in the long run?
Honestly I think that google sees through the b.s. pretty well. At least they try to. If the link is something that can be created by the owner of the site it is probably not going to hold as much value as a link that is created by the free will of another web developer. I am 100% making up crap when I say this. It would just make sense to me that google would value links that can not be altered by users more.
They work at least in the sense that you are making your website better known, but if other people don't vote for the stuff you post, it's pretty useless, IMO. Getting your website better known is good public relations - and will bring links if your website is interesting to the crowd at Digg or Netscape respectively.
if you get on digg and get a lot of diggs it means that people are that LIKE your site are being exposed to it. If people like your site maybe they will blog or link to it. those links count.