nothing outside ur site can hurt u, if there are ads on other sites pointing to ur site, then there is no way, google will penalize ur site, incase google penalize, then people will create ads for their competitors in order to get them penalize right
I think that this is true for some cases although I have a friend running them and his site is still with PR7 after tha last couple of PR updates.
the same thing happened to me I run them for almost a year and was just bumped from PR4 to PR5, but I am reading that it does negatively affect the site so here is my confusion
Welll if you sell link and cover your paes with text like "Buy a link at this page". "Sponsored links" etc. don't be surprised when one morning you wake up and you can't find your site in the index. Sell links but do it under the radar.
If you're outbound/inbound link ratio is out of whack I am sure you will see a drop in ranking. It's all about that bad neighbourhood talk.
If you are giving an outgoing link from your website to someone else (bad neighbourhood), google will definitely penalize you.
i have seen it have a bad effect on certain parts on one of my sites . however , on another part of the site it has not effected at all , simply because there the links are placed almost as part of navigation of sorts , whereas in the penalized section it was visible in a typical area such as footer .