Webmaster guidelines in AdSense policies

what does this one mean....

[StuntasticAudi]

"Do not participate in link schemes designed to increase your site's ranking or PageRank. In particular, avoid links to web spammers or "bad neighborhoods" on the web as your website may be affected adversely by those links. "

I have a link directory section on one of my websites. In order for someone to add their link they have to place my banner on their site. Is that ok?

[vordmeister]

If you are sure that offering an unknown website a link in exchange for a link back to your site is not a link scheme then you should be fairly safe.

You should get even more confidence in your arrangement if all those unknown websites are of high quality, as surely they will all be if they are prepared to do a link for banner swap.

[hunderdown]

So, as vordmeister said in a deliciously indirect way, that link directory may NOT be OK.

Personally, I don't do link exchanges, automated or otherwise. I link to sites that I think may interest my visitors. If I find a site that I think might want to link to me, I tell it so, but I don't set up a quid pro quo.