I don't see this ending anytime soon...
You will hear most ethical SEOs (including me) tell you that paid links are a dangerous path to go down, if you are looking to build up your link popularity. You will read many "official" comments, from Google and otherwise, that paid links will get you into hot water and that you are doing something that is against their Guidelines.
At the same time, you see rankings which are obviously being generated through paid links.
So, what is an ethical SEO to do? Recommend paid links to their clients?
I guess the answer is "sometimes...yes".
If you are ever going to head down this path, you must be aware that this IS against Google's Guidelines.
Here's the tricky thing about paid links.
In case you are not aware, you can sponsor a "hit counter" and they can hook you up with links on multiple Web sites, hosted in multiple locations. You can even designate the anchor text of these links. Golden opportunity, right? And, today when I searched for "search engine optimization company" on Google, I see a hit counter Web site ranking in the Top 10.
Here's the fine line: Google will tell you that the best way to get links is to develop compelling content and/or give people something that they would naturally want to link to. Does this include a hit counter? Does the developer of the hit counter get around the penalty because they developed the tool (they don't have to pay for the sponsorship)? How can you differentiate between the developer of the tool and the sponsor?
Recently, a prospect came to me asking what our rates would be to look into why they recently suffered a Google penalty. My team quickly determined that it was a hit counter sponsorship that hit them. So, what to do? To get back into Google's good graces, certainly you can call the developer and tell them that you no longer wish to participate in the sponsorship. But, how do you remove 5,000 links from 5,000 different Web sites? That's seems like a super-human task.
Recently, Eric Enge wrote a great column on Search Engine Watch on buying links. As he mentions, there is an SEO who was recently "pinged" for link buying activity who is now saying "it's not worth it".
It is very tempting to us all. Certainly, it's a lot easier than emailing webmaster after webmaster and asking for a link. Or picking up the phone to call partners and vendors to ask if they would link to your Web site. Even if you are able to make contact and have some dialogue, getting them to use the preferred anchor text in the link is even more difficult. And, in order to earn the opportunity for the link, you must put time/effort (money) into generating the compelling content.
With link buying it's so simple. Put aside a budget. Find the good links. Select your anchor text. Make the purchase. Then...pray.
I have seen on more than one occasion someone get nailed for link buying activity. I have also seen (today) Web sites doing very well with rankings, traffic and sales all due to link buying. This company has recently asked my SEO firm for a proposal.
In the proposal, I specifically mentioned my concerns about their current paid link activity (not hit counter links) and scoped out the work that I believed was necessary to move them away from paid links into generating "natural" links. I was also very careful to point out to them that while we would not report them, one of their competitors could report them, or Google could (easily?) see that they were buying links.
This is a rather old debate. I think Google is really having a difficult time with this. It is very hit-and-miss with who is being penalized and who is making thousands of dollars off of rankings due to paid link activity.
In life, and in business, I take the high road. I want to do things "by the book" (even there is no "book" of hard-and-fast rules for SEO). It is perhaps a longer road to success, but you don't run the risk of penalizing a domain. As much as clients may lack patience for long-lasting results, they would really have no patience to wait out a penalty.
So, to all of you SEO clients out there, BE PATIENT! If you are with an ethical SEO firm, you must let the process work, and not push too hard for results "now". That's not to say that an SEO firm shouldn't be accountable to results. Just track results over the course of a year. This is a long-term investment in your business.