I have a network of blogs hosted on a single server. I do interlink the blogs using a simple blogroll section which lists down all my blogs and I have placed this on the home page of all my blogs. The links do not have a 'nofollow' attribute.
I am a bit concerned as Google might consider this as link spamming and penalize me.
All my blogs have unique content and apart from the interlinking they are mentioned on popular blogs and websites as well.