What would you do if you saw hundreds of links on a website, with much of those being in the footer? Is that a natural surfing experience? Would Google penalize you for these links?
The penalty might not be the issue, actually. Tedster says that you should minimize the number of your links to preferably under 100. He also adds that it is probably not so much of a penalty but it's an issue of relevancy:
I don't think its really a penalty -- more like all that anchor text on a page sort of blurs or dulls the relevance signal, and too much internal linking can also make it difficult for the algo to tell which pages are most important.
Be careful with your linking in general. Ted adds:
Eliminating, or lowering the number of internal links in the footer is worth a try. Also note if there are many repetitions of an important keyword in the anchor text anywhere on the page. When that's done to excess, it does seem like it hurts rather than helps.
Not all folks agree (though I'm inclined to side with Ted on this one). One forum member has had luck with his 900 links:
I have ALL my links in the front page; 900 or so in a css menu that activates when they highlight a certain category. My traffic increased and all pages are in the index
Forum discussion continues at WebmasterWorld.