IF the link is mutually beneficial to each others company, and you have other business relations, exchanging links can be very beneficial (although still not very much weight are given to these links); however if you are exchanging links for the purpose of increasing your rankings only you are actually violating Google’s webmaster guidelines.

Don’t 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 own ranking may be affected adversely by those links.

In this a “Link Scheme” is any technique designed to increase PageRank.

Link Exchanges are alive and well, but have no noticeable improvement in rankings. Bottom line: If you receive an email asking you to exchange links delete it. Instead look to form solid business relationships with others where it is mutually beneficial.

Link exchange is marketing 101.. AMEX links to Delta. Delta links to AMEX. They promote each other because they target the same demographic.

Nothing wrong with link exchange when you keep it natural (slow and steady) and highly relevant to your site’s theme of interest. It’s right there in Google’s webmaster guidelines!