As expected, Google has added a paid links reporting form to its Webmaster Tools. Google has been warring against paid links that pass PageRank, such as those that don't use the nofollow attribute or some form of redirect.
Last month, Google engineer Matt Cutts offered some guidelines for evaluating paid links to see if they fit with Google's guidelines.
Google has not said exactly what it will do with the reports, other than saying, "We'll review each report we get and use this feedback to improve our algorithms and improve our search results. in some cases we may also take individual action on sites."
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