Link exchanges can help now and then when it is a well run exchange that gives you as much control as to who is linking directly to you. Most do not however and you can find yourself with some dodgy backlinks coming in to you which don't look great. Also if you are not careful and someone hasn't done their admin properly at the exchnage end of things, you can end up linking outwardly to dodgy neighbourhoods which is very bad.
When you do it yourself without the aid of an automated link exchange program, you have 100% control. In my opinion, that is the only way it should be done or else you may be asking for trouble.
agree with Janet. link exchange is part of link building. link exchange also good SEO technique, because you get links from related niche sites.