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Sounds to me as if you have a problem on a few different levels. First, yes what you describe is crosslinking. How you go about crosslinking can be a problem and youíve described the form that has appeared to get other sites in trouble. There are some good discussions going on around here that can help you to perhaps understand this one better. Run a site search at the top of the page for crosslinking. You may want to check this discussion out. [webmasterworld.com...]
Your next problem is bigger though
I added maybe a few words that were the same color as the background
Oops! Thereís a obvious no-no. Yes, your competitor may have done this and yes, it may even be working right now for them but unless youíre looking at your site as a throw away then Iíd stay away from these tactics. Youíll find some terrific info around here that can help develop high rankings without these little tricks. I just donít see it as worth the risk.
Also I used linkstoyou
Thereís another problem. Weíve seen this happen to others who get themselves in link clubs or whatever. Look at the Reciprocal Linkage Topics forum for ideas on building your linking up without tricks or clubs that can come back to bite you.
Iím sorry on the one hand to say it but yes, you have followed a few practices that may have got you into trouble. The good thing is youíve pointed them out so that means you basically know what might have been a bit dodgy and now you can see what to do to fix it. The most important thing is youíve come to the right place to get help. The other is youíre not the only one who has been in this same boat.
If the damage is irrepairable
If youíve been busted than itís time to fix it. This may mean youíll be out for a while, nothing you can do about that because of the cycle of indexing and spidering. If I were to suggest anything it would be to go through your site and clean it up. Remove all the little hidden keywords and hidden links, clean up your code. Read Brettís excellent articles on Google both the Googleís Knowledge Base [webmasterworld.com] and Successful Site in 12 Months with Google Alone [webmasterworld.com]. Use the site search for additional information and specifics.
I would get out of the linkstoyou program and remove anything from it from your site. I would then read up about legitimate linking perhaps starting with Increasing Traffic from Reciprocal Links [webmasterworld.com], Linking Ė Whatís the big deal? [webmasterworld.com], Link Exchanges [webmasterworld.com], and probably Prompting sites to reciprocate links [webmasterworld.com], will get you started.
For crosslinking, start reading. There are lots of ideas around. Iím going to have to write up the article Iíve been promising and post it on my theories of crosslinking. There are bits and pieces of it floating around as well as some terrific ideas from other members. I agree we need to talk more about it.
So, I hope this gives you a start Spyguy. Keep posting. There are no bad questions you know and youíll sure find help around here.
Next time I'll just try and do it the right way though- and I'll have to look into the crosslinking thing a bit because I think I am still doing that.
Thanks for your help!
Iím certainly not opposed to using every opportunity I can to get to the top and stay there. Itís just that weíre always balancing that with the risks. Good luck!