Yesterday, the Google Webmaster Blog came out with a post that said that cross-linking is not encouraged between many sites.
Before you begin cross-linking sites, consider the user's perspective and whether the crosslinks provide value. If the sites are related in business -- e.g., an auto manual site linking to an auto parts retail site, then it could make sense -- the links are organic and useful. Cross-linking between dozens or hundreds of sites, however, probably doesn't provide value, and I would not recommend it.
But WebmasterWorld members are dissatisfied with this. Blog networks, for example, utilize this practice and get instant rankings. So why stop?
Quadrille puts it quite nicely. There's still no value to the user with this strategy.
As you say, every new blog instantly crosslinks with many others, regardless of race, color, creed, quality or relevance. So, if we're honest, the value of each link to a visitor is close to zero - it's a lottery, frankly, rather than a recommendation.
If the site is not relevant, Miamacs says, there is little weight placed on the link because Google recognizes themes of websites.
A site not relevant to the anchor text it links out with, doesn't pass much power.
This really isn't anything new. Back in 2005, Google took the same approach. If there's no value added, Google doesn't rank those links, so why bother cross-linking?
Forum discussion at WebmasterWorld.