Howdy! Welcome to our community of more than 130.000 members devoted to web hosting. This is a great place to get special offers from web hosts and post your own requests or ads. To start posting sign up here. Cheers!
/Peo, FreeWebSpace.net
Yes, they do penalize sites. They lose good ranking. They do it because this is not natural way of getting backlinks and it doesn't shows how popular site really is. Other reason is money. Why would sites with deep pocket have more backlinks and better ranking.
Good news is that google can't find all paid links.
You said paid backlinks... In this case that should be specified about which payment backlinks you are talking about. If they are on your we site yes it will. If they are on the web site you have links from - no
That is untrue. Google gives websites with one-way paid backlinks lower PageRank. This means they appear further down the Google search results giving them less traffic in the end result.
This is so people can't cheat Google by buying one-way paid backlinks from popular websites in the for $200 from a top 100,000 alexa website.