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Is it okay just to put it in root? I've heard that Google may consider this a "link farm" and ban the site.
What's the best way to proceed?
Thanks all! I just discovered this forum, what a fantastic resource!
Generally people put their Links page in a /links directory. Some people use a subdomain (subdomains are typically created as seperate sites).
Another way to look at it is to include links with your content (links should be related of course). It will defintely look better than a page full of links.
Personally I like the idea of a links directory as opposed to incorporating the links within your site. I feel that if you are going to incorporate links within your free flow context - there should be an index/directory which includes all the sites you link to. It keeps your site clean & easy to navigate.