Today, in response to your request, we’re providing a paid links reporting form within Webmaster Tools. To use the form, simply log in and provide information on the sites buying and selling links for purposes of search engine manipulation. We’ll review each report we get and use this feedback to improve our algorithms and improve our search results. in some cases we may also take individual action on sites.
Ok, so some paid links are going to stick out like a sore thumb, but how in the world can Google tell what is and what isn’t a paid link? If I want to add an external link to a friends web site, that might look like a paid link to some. Meanwhile, a blogger might slip in a paid link as part of a blog post, and Google would never know.
I understand what Google is trying to do, but seriously, they’re the ones that opened up this can of worms, by relying heavily on the value of links for the algorithm. Surely paid links doesn’t effect that great of a chunk of the web, that they now need to re-think the entire linking algo.