Our policy regarding linking is based on what Google outlines in it's document on website quality guidelines.
To view the full document on The Google website click here
These quality guidelines cover the most common forms of deceptive or manipulative behavior, but Google may respond negatively to other misleading practices not listed here (e.g. tricking users by registering misspellings of well-known websites). It's not safe to assume that just because a specific deceptive technique isn't included on this page, Google approves of it. Webmasters who spend their energies upholding the spirit of the basic principles will provide a much better user experience and subsequently enjoy better ranking than those who spend their time looking for loopholes they can exploit.
If you believe that another site is abusing Google's quality guidelines, please report that site at https://www.google.com/webmasters/tools/spamreport. Google prefers developing scalable and automated solutions to problems, so we attempt to minimize hand-to-hand spam fighting. The spam reports we receive are used to create scalable algorithms that recognize and block future spam attempts.
Make pages primarily for users, not for search engines. Don't deceive your users or present different content to search engines than you display to users, which is commonly referred to as "cloaking."
Avoid tricks intended to improve search engine rankings. A good rule of thumb is whether you'd feel comfortable explaining what you've done to a website that competes with you. Another useful test is to ask, "Does this help my users? Would I do this if search engines didn't exist?"
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.
Don't use unauthorized computer programs to submit pages, check rankings, etc. Such programs consume computing resources and violate our Terms of Service. Google does not recommend the use of products such as WebPosition Gold™ that send automatic or programmatic queries to Google.
To view the full document on Googles website click here