Read This:
http://www.techcrunch.com/2007/10/24...og-link-farms/
Techcrunch seems to say that it's punishing blogs and blognetworks that have lots of links to other parts of the blog or network.
Quote:
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The only clear change appears to be among large scale blog networks and similar link farms, where each site in the network provides hundreds of outgoing links on each page of the blog to other blogs in the network, in some cases creating tens, even hundred of thousands of cross links. Previously such behavior has been rewarded by Google with high page rank, although it would now appear that this loop hole may now be shut.
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Skinny