Search guru-supreme Danny Sullivan got an answer out of Google this weekend concerning the search engine's long-suspected practice of punishing websites in search results when they are alleged to have sold outbound links not including a nofollow tag. It's a controversial policy that has an unclear impact on the search landscape.
As critics point out, however, Google still allows advertisements for paid links to be run through the Google Adwords service. Though they don't pass on pagerank, AdSense ads themselves are of course paid links that do deliver traffic for a fee. Perhaps Google just doesn't like paid links that they don't get a piece of the payment for.
Links bought with the intention of increasing not just traffic but conferring pagerank authority from the seller to the buyer may in many cases give artificial authority to the sites of link buyers. Punishing this practice, though, may hurt the pagerank of reputable sites that the public fully expects to appear high in search results but whom happen to sell links.
Like any system for determining worth, counting inbound links is now as open to gaming as anything. Where the line lies between gaming Google and engaging in legitimate commerce is ultimately subjective. Google is in all likelihood not even going to try to go after all sellers of paid links; just the most "egregious violaters." As Sullivan says, though, it is Google's search engine - none of us have a right to any particular treatment in it.
For extensive and informed discussion on the topic, see Sullivan's coverage at his group blog Search Engine Land.