So Matt's comments yesterday (he didn't pay me for a link, so I'm afraid I can't give one out) set off a treasure trove of commentary about the use of paid links. Matt's contention:

Yes, if you sell links, you should mark them with the nofollow tag. Not doing so can affect your reputation in Google.

Let me point out just a few of the reasons why this is a ridiculous statment

• Google should not have any influence on how markup is controlled. They are completley out of their jurisdiction in making this request.
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• "Nofollow" was created to say "I don't have editorial control over this link or I can't vouch for its quality." It was not created to say "money may have partially influenced my decision to provide this link." If that were the case, most of the link structure of the commercial web would be invalid
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• Google has no ability to track paid vs. unpaid links effectively. For every example folks are giving in the forums of how they might do it (banner ad sizes, common text link formats, etc.), there are 5 ways to have paid links they could never track down.
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• Promoting fear in your public relations to help keep your results of higher quality is a naive, short term solution. Google's forte in quality has always been about engineering solutions algorithmically and not via public relations.
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• The inherent arrogance in telling web developers to modify their content to suite your whims can not have good long term results. Google is valued as highly as they are because of their brand's goodwill. You can ask yourself whether this will help or hurt that goodwill.
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• In order to be ranking competitively in Google in many, many spaces, you need to buy links. Anyone who's done large scale link research in any niche will immediately identify dozens if not hundreds of directories, sites, membership-signups, etc. that provide high quality links (that are editorially given), but the require some type of fee. The Internet is not a commercial free, capitalists-shunned part of the world, and if you want publicity and recognition online, just as offline, you have to be prepared to spend.

Love to hear your thoughts on the subject, too.