cnvi - 1:04 am on Jan 11, 2013 (gmt 0)
Google does not flat out ban link exchange. They specifically suggest you avoid "excessive link exchange" which means avoid high volume low quality services or products that guarantee you a high number of links over a short period of time.
If you link exchange with high quality sites in very low natural volume, you will not only brand yourself within its realm of interest but you will also get traffic from the links themselves.
Google would never say "do not link exchange" as that is a serious Restraint of Trade matter which could set them up for big time legal matters.
Link and be linked to! Just keep it relevant.
On a side note check out what Bing has to say about link exchange they recently updated their guidelines:
from [bing.com ]:
Donít skip this as a valid link building tactic, however. New websites need links, and exchanging a link is a solid way to not only gain a trusted inbound link, but potentially to gain direct traffic form the other website. That traffic could easily bring with it more links as those new visitors spread the word about your own website.