There is much discussion in these last few months about reciprocal linking. In the past few Google updates, reciprocal links were one of the targets of the search engine's latest filter. Many webmasters had agreed upon reciprocal link exchanges, in order to boost their site's rankings. In a link exchange, one webmaster places a link on his website that points to another webmasters website, and vice versa. Many of these links were simply not relevant, and were just discounted. So while the irrelevant backlinks were ignored, the outbound links still got counted, diluting the relevancy score of many websites. This caused a great many websites to drop off the Google map.

There is a Google patent in the works that will deal with not only the popularity of the sites being linked to, but also how trustworthy a site is that you link to from your own website. This will mean that you could get into trouble with the search engine just for linking to a bad apple.

Many webmasters have more than one website. Sometimes these websites are related, sometimes they are not. You have to also be careful about interlinking multiple websites on the same IP. If you own seven related websites, then a link to each of those websites on a page could hurt you, as it may look like to a search engine that you are trying to do something fishy. Many webmasters have tried to manipulate backlinks in this way; and too many links to sites with the same IP address is referred to as backlink bombing.

One thing is certain, interlinking sites doesn't help you from a search engine standpoint. The only reason you may want to interlink your sites in the first place might be to provide your visitors with extra resources to visit. In this case, it would probably be okay to provide visitors with a link to another of your websites, but try to keep many instances of linking to the same IP address to a bare minimum. One or two links on a page here and there probably won't hurt you.