Google recently stated it does not like sites that sell links and penalizes the link-sellers. However, how does google distinguish between selling a link and exchanging links? I guess google can check if both sites have link linking back, but what about a three-way link exchange?
Link exchanges in good faith are ok, this means your exchanging links with a site "directly" related to your content. You can use the ref="nofollow" attribute in your hyperlink tag if you are really worried about it.
I think if there's a line-in-the-sand definition, it would be not excessive in number, rather than not related to your content. Actually, that's what the Google Guidelines say on the matter. Google has somewhere in the ballpark of 70 % of the search market, so it pays to at least know what they find acceptable.