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Monday, September 06 2010 @ 07:08 PM CDT
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According to Matts Cutt

The hot news these days is links, to link or not to link that is the question. After Google’s call to all webmasters requesting the reporting of paid links coming in and being counted by Google.com. There are a few big questions arising from this call out. 1. What about relevant reciprocals? 2. What about paid directories?
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Directory Paid Links - Do they count? - YES

Previously I posted a news release per Google calling all webmasters to report any purchased links so Google can alter their algorithm to ignore and perhaps penalize these links. This article will discuss the potential results of rankings for sites engaging in large paid campaigns with niche directories.
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Report this Paid Links! (Per Google)

Why should I report paid links to Google?

Google and most other search engines use links to determine reputation. A site's ranking in Google search results is partly based on analysis of those sites that link to it. Link-based analysis is an extremely useful way of measuring a site's value, and has greatly improved the quality of web search. Both the quantity and, more importantly, the quality of links count towards this rating.