I have always heard that search engines penalize for incoming links from unrelated websites. While I agree that you should create as many links to your site from related websites, but what is the harm if you receive links from unrelated websites?
first, i'd like to frame the discussion, softsor. you're worried about getting penalized by links from unrelated websites. if the links you're talking about from these unrelated sites are reciprocal links, then don't worry about getting penalized. just worry about wasting your time. engines are getting smart about recips, as you know. if we move on to one-way incoming links, then i haven't seen much evidence that engines penalize incoming links from "unrelated" websites. if they did, it'd be too easy to knock your competitors out of the SERPs by pointing links at your competitors from crap sites (hence "googlebowling" http://www.threadwatch.org/node/2308). google's statement that "there's almost nothing a competitor can do to harm your ranking" is true, within reason. arguing that point will open up a huge can of worms, but it's outside the range of this discussion. by and large, if you're not in a super-competitive market, you shouldn't worry about it. very few competitors will find their time and money better spent on trying to take you down as opposed to trying to improve their own positions. however, if you're actively seeking links in quantity from sites or in patterns that signal spam (doorway pages, blogspam, link farms, etc) then sure - you should scale that back in a hurry if you're looking for your site to have longevity in the SERPs. generally, you should evaluate "related-ness" on a page-by-page basis, as the engines evaluate them. there are plenty of cases where the "theme" of the website isn't necessarily related to yours, but the page you're getting a link from is spot-on. that's a great link. if i get a link to a cooking site that i control from a frequently visited personal site (e.g. "Amy's Imagination", or some such), generally i feel terrific about it. especially when the page title of her site is related to the page of mine she's linking to. even if it's negative, e.g. the title tag is "Recipes I Despise", where the body copy is an article that has a link with the anchor text to my page as "cooking sites like these suck", that's fine by me. it's got "recipes" in the title and "cooking" in the anchor text pointing to my site, and these words are obviously related, and that makes me feel good. the fact that there are other words that i wouldn't prefer, like "suck", in the anchor doesn't concern me. spiders are dumb, within reason. think about getting links from related pages (which doesn't include pages with "links" in the url), and if you get them, be happy. they should help you in terms of link popularity. also, links from related pages - especially when they're high-traffic pages and placed in the body copy - stand to benefit you in terms of actual user traffic, which takes a degree of your dependence on traffic from engines out of the mix. which should make you feel good.