julinho - 11:51 am on Jun 28, 2006 (gmt 0)

Short answer, yes, a one way, non reciprical link from another site that Google thinks you may have paid for will get you dropped from the index, according to Matt Cutts.

This is not the way I understood.

What he said (I think) is that if Google thinks you paid for a link, the link will be devalued.
So, if your site rankings are based entirely (or mostly) on paid links, the links may be suddenly devalued and you lose the rankings.

Now, if a site (your competitor) has enough legitimate back links to deserve good rankings, throwing paid links at it shouldn't make any harm (actually, it could benefit it instead).