Cross linking refers to the process of linking between two sites. Whether or not they are owned by the same person, cross linking is the process on which the internet is built. It allows users to reference sites with content similar to that which they are already viewing, and may be of further interest to them.Cross linking also serves an interesting purpose in terms of search engine optimization
It's not a bad idea. But cross-linking is not advised if your three sites aren't that great in terms of quality and rank.
these days, frequently google is doing frequently update for that who only works for search engine. so, link exchange from same ip may be caught by google update.
It is certainly not bad, if done in a natural way(if link is genuinely beneficial for the user). And if you do it in a spammy way, i mean just to get link juice, your site will get penalized.
If websites are closely related and are hosted on different servers (different IPs), than is not a bad idea. Otherwise you might get punished, as OSSEO already mentioned. If you link them can make something like this: s1->s2>s3>s1.
cross linking works great if done properly ! here are some hints and they reason why different hosts ( think why) must use privacy in the domain and also use different registars ( Google is Google mix it up!) same registar does narrow down the chances) use different themes( stop the mirror image of you other sites ( side bar on left or right alternate all this stuff! home page link or an incontent page link only NO footer links or link on every page( that was killed long time ago read the google blog!) Have the sites in semi similar niches barbie dolls and a travel blog do NOT mix !
If it's relevant, it's not bad but actually good. I have a similar post coming up for the same (Scheduled for 6th dec) on myblogismymoney.com..Do read it. It's a video on whether blogroll links are good/bad.