In the session, he said that even though they show links in Webmaster Tools and a link command report on Google, it does not mean they count those links. He said, Google only counts links they trust.
Here is the paraphrase from the Q&A:
Q. Everyone says I need more links. How do links improve the quality of the site? I don’t want to play this game and I don’t want to do this.
A: What matters is bottom line. Links are a part of search – they represent online reputation. Although there are many tools that report links, none of the tools can tell you which links are trusted by Google (not even Google’s tools). While the link structure looks bad from the outside, the actual linkgraph that Google uses/trusts looks much better. When the New York Times complained about a site with 10,000 spammy links, Google investigated the site and not a single link had slipped through Google’s filter. Only the links Google trusts count.
So there is a discussion around which links Google trusts and furthermore can you trust what Matt is saying here.
People do not believe that Google is able to detect all spammy links or paid links. People do not believe that Google was not affected by the 10,000 spammy links the NY Times uncovered for the Mother's Day article with flower sites.
So Google doesn't trust your links and you do not trust Google.
Honestly, I feel as time goes on - more and more SEOs are trusting Google less when in my opinion, Google is being more transparent then ever before. Maybe that is the issue - too much transparency leads to more questions and more trust building issues?
Google displaying links that are nofollow and not trusted is nothing new but for some reason it has started a hot debate.
Forum discussion at WebmasterWorld.