Wow, a lot of good SEO talk here. I just got back from the SES conference in Chicago, so I’ll add in my additional comments…
What search engine algorithms are looking for are natural patterns of links to your site. If you go out and buy 1000 links to your site tonight, it doesn’t look natural to Google tomorrow. It won’t hurt your site, but it also won’t help. But, it’s not the amount of links, rather how you got those links that Google is looking at. Take for example a Katrina Relief website that gets posted right after the hurricane. A site like that probably got thousands of links overnight, but they were given from a wide variety of sites across all sorts of industries, domains, etc. That site will rocket to the top of the SERPs because the links occured naturally.
The trick for us as search marketers (oh, you thought you were a gambling affiliate?) is to create links to our site that occur in a natural sort of way, whether it is natural or not. That means a lot of hard work and time going out to find quality sites that will want to link to you for a variety of reasons. Maybe you wrote a good article, mayber your blackjack tips are so good that a site about a blackjack system wants to link with you, there could be a million reasons to potentially get links. Keep it on a natural course and everything will work out fine.
On the reciprocal linking issue. There is certainly value to reciprocal links, that is easy to prove. But, you still have to do it right. The best advice is this, are you linking to another site to benefit your users, or just trying to game the system? In the long run, links done for the right reasons will prevail.