Google states in thier Webmaster Guidelines “Don't participate in link schemes designed to increase your site's ranking or PageRank. In particular, avoid links to web spammers or "bad neighborhoods" on the web, as your own ranking may be affected adversely by those links.”1) Sophisticated spam detection algorithms are used by all the popular search engines and are updated frequently to stay ahead of the spammers.
Sudden dramatic increases in inbound links are a danger sign that a spam site is linking to your site. If inbound links are devalued, the site that is being linked to could be negatively effected. In the eyes of the search engines, you may be “guilty by association”; at the very least a site could come under close scrutiny by the search engines.
To avoid bad incoming links to a site, do not pursue link building practices with the intent of artificially influence rank. A site should grow and develop through a natural process. It is natural that a site link with suppliers, customers, competition, governing organizations and other authority sites.
If poor quality links to your web site have appeared, you can contact the linking site administrator to request that the links be removed. If the site is a spam site, you will most likely not get a response. Unfortunately, Google cannot remove the links. You can restrict access to your site from the linking site through your .htaccess file. This will not remove the links, but once the links are dead, it is possible that the spam site will remove them.
You should conduct a thorough security review of your site to detect signs of hacking. If there are a large number of inbound links to your site, the spammer may have hacked into your host account to place files. It is possible that your site is linking to the spam site without your knowledge. Finally, report spam websites to Google through 'spam report' and 'paid link report' forms.
With the upcoming release of Google's new algorithm in 2010, Kaffein, quality inbound links will factor into a website's authority ranking more than ever. Engaging in inorganic link building techniques, link spam, reciprocal link exchanges, link farms, and link cloaking will ultimately result in PageRank devaluation and a reduction of a site's ranking. Linking remains an effective SEO strategy for successful websites. Seeking quality links from other quality sites through a natural process will be rewarded by the search engines. Furthermore, high quality links will protect your website from negative impact of the low grade or bad links.