tedster - 7:33 am on May 27, 2012 (gmt 0)
On the other side of this, I've seen a site ranking very well with 750,000 paid links (clearly ads - no attempt to disguise them, just ignorance about nofollow) and almost nothing else. The thing is, in this case the business is a very strong local brand - high end stuff, too.
Clearly to me, those paid links are not the reason for the rankings and traffic. And just as clearly, they are only being ignored, not penalized.