Robert_Charlton - 8:58 pm on Jun 4, 2011 (gmt 0)
When a link is added to your site, it is effectively an advertisement.
Algorithmically, at least, this is exactly backwards. There's an important distinction that should be made...
When a link is added to your site, Google would like to treat it algorithmically as a reference or recommendation.
When a paid or advertising link, or comment spam is added to your site, in Google's eyes it no longer is a recommendation. It's an advertisement... and, for understandable algorithmic reasons, Google wants to keep paid recommendations and editorial recommendations separate.
Same end result.
Google doesn't think so, and the FTC doesn't think so. Ads are identified as such in most media.
That said, Google isn't straining to make its top AdWords results contrast significantly (in a visual way) from its organic serps. Google does understand human behavior, even if it's not always saintly itself. ;)