People often argue if Google can really automate the process of detecting if a site has paid links or not. Now, some are easy to detect, and most link builders now go after encouraging people to link to their site because the site deserves it. But when is it too much and should you worry about Google catching on to gray area tactics?
I wanted to share a thread I spotted in the Google Webmaster Help forum where Googler JohnMu answered a question on why one site saw his rankings drop "over night" after years of success ranking very well.
Looking at your site and how it's connected on the web, it might be that the links to your site are not counting the way they might have in the past. In general, it is important to us that links are not just exchanged, bought/sold or otherwise used in an attempt to manipulate rankings, as we have detailed in our help center article at http://www.google.com/support/webmasters/bin/answer.py?answer=66356
If you find that your site has issues with regards to our Webmaster Guidelines that can be resolved, I would recommend doing that and then submitting a reconsideration request, detailing the changes that you have made.
Now, I often see this being said by John and fellow Googlers.
I do often find it amazing how webmasters and SEOs would go into a Google Webmaster help discussion, link to their site and complain their rankings drop. It is like asking Google to look at your site, when they know they have paid links.
But it is done all the time.
Forum discussion at Google Webmaster Help.