Google's Webmasters Guidelines for Paid Links states that webmasters should not participate in buying and selling of links on their sites.  Google will even go as far as to discount those links from their index rankings and penalize the sites that sell or buy links.  Now, everyone knows that paid links are just part of the web economy and are not likely to ever go away.  Just face it no one makes more money from paid links than Google itself,  so why does Google have such harsh words for paid links.  In their defense, they do acknowledge that paid links are part of the economy, and that such advertisements should carry a nofollow tag on them.

The funny part about the matter is that Google only appears to care about the little guys going this.  Just think about it,  What about the Yahoo directory, or any other paid directory for that matter.  Just  to put your site in for a listing on the Yahoo Directory it cost $299 (nonrefundable) and if you do get listed on the directory it is going to cost you that much every year just to maintain your position there.  Talk about paid links at its best, and just to see, check out the source code of the links, nope there is no nofollow tag, just a good old standard text link.  Why then does Google give the Yahoo Directory a pagerank of 8.  I'm not saying that Yahoo doesn't deserve such a high rank, just that Google needs to apply its penalties evenly.  Apparently if you sell them for a high enough amount its just fine.  Just look at Yahoo!