Here's a must-read for the week: a great interview with Google's Matt Cutts by Eric Enge, CEO of Stone Temple Consulting, in his blog this morning.
There's terrific information on link building from Google's perspective, among other topics.
What Google looks for are links that will stand the test of time. In Matt's words:
So, what are the links that will stand the test of time? Those links are typically given voluntarily. It is an editorial link by someone, and it's someone that's informed. They are not misinformed, they are not tricked; there is no bait and switch involved. It's because somebody thinks that something is so cool, so useful, or so helpful that they want to make little sign posts so that other people on the web can find that out.
Matt also clarified Google's views on links originating with Digg:
Whenever you pay money to a social media consultant to try to show up on Digg, you are not paying for links. You are funding some creativity; you are sponsoring your page for some creativity.
It's not like you held a gun to anyone and said “Okay, you have to link to me.” The people who link to the site are linking because it's something compelling instead. So, there is still some editorial choice there.
Don't miss Matt's take on widgets either. For that you'll have to go to the interview.