mjtaylor - 7:58 pm on Sep 1, 2011 (gmt 0)
There's nothing wrong with reciprocal linking where relevant. Indeed, it's natural that a fishing captain on the Outer Banks will link to a local B&B or other lodging, restaurants, attractions or other sites of interest to visitors to the area. And why wouldn't they ask for a link back and receive one? That's relevant and of use to the site visitor. As others have indicated, if a site's link profile reflects mostly reciprocal links, that is not a natural profile. Google and other SEs want to see a variety of links from a broad range of sources.
Guest blogging, even when reciprocal, is a perfectly acceptable way to build links. I recently interviewed another SEO on my blog, and he interviewed me; we both were looking for good content at the same time and it beneficial for our blog's visitors.
Here's my guideline: if you're doing something just for its SEO impact, it's not natural and it's not "best practice" SEO. If you're providing useful content that brings you traffic, an increased audience, greater brand recognition *and* a link, you have the right formula.