We've asked this a lot, but it happens to be a question that concerns a lot of webmasters. A webmaster specifically notices that he's been unable to get links now but it was a lot easier back in 2004 and believes it may be because of the search engines penalizing him.
Google Webmaster Central rep JohnMu chimes in to say that it depends how valuable the reciprocal link is.
I think the not-so-simple answer to this question is "would you do that if search engines didn't exist?"If you link to a site and they decide to link back to you (perhaps even for an unrelated reason), those links may be providing value to your visitors and they may well be important to your site. However, just "exchanging links" for the sake of exchanging links (or even just as an attempt to influence search engines) is likely not to be that important to your visitors and for your site in general.
If you're doing it to manipulate the search rankings, it's not a good idea. If it's because value is being provided, by all means, go for it.
Forum discussion continues at Cre8asite Forums.