With Google's updated Webmaster Guidelines which have been added to the Google Webmaster Help Center, Google has officially acknowledged statements made by Matt Cutts on paid links.
Some of the findings have been outlined in a WebmasterWorld thread.
Google works hard to ensure that it fully discounts links intended to manipulate search engine results, such link exchanges and purchased links.
However, some find fault with that statement, especially with regards to the clause in the guidelines that encourage users to submit their sites to ODP and Yahoo! directory.
Perhaps I'd point to a post made last week by Barry which says that only quality links get included in the aforementioned directories and that may not necessarily reflect on a PageRank scale. These links are acceptable because they still pass a manual review. Submitting to directories that do not pass a manual review and accept thousands of sites for simple payment is not what Google seems to be looking for.
Discussion continues at WebmasterWorld.