It’s a simple Google TOS rule: don’t buy links for the sake of manipulating search engine rankings. A few big players are getting caught (JC Penny, Forbes, etc.) Below are some key items for you to read from Google that will help identify what’s ‘illegal link buying’.
[1] Our quality guidelines are at https://www.google.com/support/webmasters/bin/answer.py?hl=en&answer=35769#3 and the specific guidance about buying/selling links that pass PageRank are at https://www.google.com/support/webmasters/bin/answer.py?answer=66736 .
[2] If I could recommend a single post that discusses our policies against buying/selling links that pass PageRank, I would recommend https://googlewebmastercentral.blogspot.com/2007/12/information-about-buying-and-selling.html . That post discusses why we think paid links that pass PageRank are a bad idea and gives a timeline with pointers to posts that we’ve done in the past about this topic.
[3] I’ve commented on an article about Conductor as long ago as 2008 at https://www.businessinsider.com/companies/linkexperts#comment-7c7a6c797dc19948b3d4d400 when it was still called LinkExperts. At the time I said “As the head of Google’s webspam team, I would just like to point out that paid links that pass PageRank are absolutely a violation of Google’s quality guidelines, and we do take action on those violations.” I also commented on Twitter just a few months ago at https://twitter.com/#!/mattcutts/status/22019997220 when I said “Because someone asked me about it: Conductor paid link network does violate Google’s quality guidelines, and we do take action in response.”
[4] https://www.google.com/support/webmasters/bin/answer.py?hl=en&answer=35843 is a good guide to our reconsideration request process.