I'm going to have to respectfully disagree with the first sentence of your post, Geeurbie. While the incoming links are important (regardless of a niche or general site), it's the content that makes or breaks a Web site.
"being involved in link farms." If link farms link to our site, it wont do anything. Why? because then i would set up loads of link farms and set them against my competitor. So yeah.. Overall if you setup the right anchor links/keywords you can almost take all his google search engine traffic ( i have done it before and trust me.. its worth it )
Dan I specialize in niche and local markets and links are not that big a factor here and I know it goes against what most SEO understand. But I see it every day where sites with a few links out rank those with maybe a 100. Most niche or local websites rarely exceed 200 links. These websites are mostly small business that either don't understand links or do not have the time or resources to acquire links. It is not uncommon for me to see sites that have more outbound links then inbound. Check it out for yourself do a search by your city and then search for a few local service providers like plumbers, roofers, or AC repair. The only sites with lots of links are the information and referral sites. When you examine the actual local sites you will see these sites don't have many links. Thus the optimized site will do much better especially if they have fresh content.