I saw this and wonder why it's tucked into a guideline on paid links because they don't mention link exchange anywhere else.
Nowhere else in Google's updated webmaster guidelines does it state that link exchange or reciprocal linking should be avoided.
Google does state to avoid "link schemes" .. They fail to define it. They are most likely referring to FULL DUPLEX link development where you pay a small fee and get linked to thousands of sites overnight.
Google if you are watching this thread, when will you clarify the difference between editor based link exchange for the end user and full duplex link exchange schemes?