Even before the Penguin update, a lot of webmasters had been getting messages from Google about questionable links. About a month ago, we talked about Google de-indexing paid blog/link networks, which led to some such messages. This appears to have been only one of Google's major efforts in early 2012 to crack down on search engine manipulation and black hat tactics.
Then came the Penguin update (formerly known as the Webspam update). This is designed to target webmasters engaging in such tactics and violating Google's quality guidelines. One of those guidelines is about not participating in linking schemes designed to increase your site's PageRank (and we know PageRank is still a major part of Google's algorithm, despite an increased emphasis on social and personalization).
"In particular, avoid links to web spammers or 'bad neighborhoods' on the web, as your own ranking may be affected adversely by those links," warns Google.
On a page in the Webmaster Tools help center specifically about Link schemes, Google says, "Your site's ranking in Google search results is partly based on analysis of those sites that link to you. The quantity, quality, and relevance of links count towards your rating. The sites that link to you can provide context about the subject matter of your site, and can indicate its quality and popularity. However, some webmasters engage in link exchange schemes and build partner pages exclusively for the sake of cross-linking, disregarding the quality of the links, the sources, and the long-term impact it will have on their sites. This is in violation of Google's Webmaster Guidelines and can negatively impact your site's ranking in search results."
Google gives the examples of links intended to manipulate PageRank, links to web spammers/bad neighborhoods, excessive reciprocal links or excessive link exchanges and buying or selling links that pass PageRank.
Eric Ward, who as been an authority on link building for many years, has a good round up of ways links can affect your search rankings. In a nutshell, these include: other sites getting enough quality links to outrank you, google algorithm updates, trusted sites linking to you shutting down, sites cheating and outranking you, Google devaluing sites linking to you, Google caught you using spammy tactics, and negative SEO.
Note: Rand Fishkin from SEOmoz is currently testing the negative SEO waters (though some question how effective his experiment will be given.
"The best way to get other sites to create relevant links to yours is to create unique, relevant content that can quickly gain popularity in the Internet community," says Google in the help center. "The more useful content you have, the greater the chances someone else will find that content valuable to their readers and link to it. Before making any single decision, you should ask yourself the question: Is this going to be beneficial for my page's visitors?"
"It is not only the number of links you have pointing to your site that matters, but also the quality and relevance of those links," says Google. "Creating good content pays off: Links are usually editorial votes given by choice, and the buzzing blogger community can be an excellent place to generate interest."
This illustrates the close relationship the Penguin update has with the Panda update. The Penguin update goes after the abuse specifically, and the Panda update promotes the good stuff that people actually want to link to. Granted, this is when everything is working as it is supposed to. Google's algorithm isn't perfect, and the company will no doubt continue to make adjustments.
It also illustrates the significance of the blogosphere and social media to search. While I believe Google has a lot of work to do in the relevancy department, it does show why Google wants to use social data so much in rankings. Of course social signals are ripe for abuse, and I'd not be surprised to see future Google updates target social abuse specifically, the way they've targeted link abuse with the Penguin update and with past efforts.
As I talked about in a recent article, the titles you use for your content can go along way in increasing sharing. Great content, however, is what people link to. That's been true for as long as I can remember, and it's not going to change. People will link if you give them a reason to.
If you think Google unfairly penalized your site with the Penguin update, Google has given you a place to explain (there's a petition to have the update killed, as well). If your site was hit, and you know it was probably because of some shady practices on your part, you can still take the initiative and try to clean things up.
Of course, remember that link schemes are only one part of Google's quality guidelines. You can read about the rest of them here.