A previous post in the Tutorial on Reciprocal Links gives examples of good and bad reciprocal links. It concludes by saying “that reciprocating a link will not automatically make a good link bad or indeed make a bad link good, what is important are the individual links themselves”. This post emphasizes the dangers of reciprocal links.
Google has deployed a new infrastructure and software upgrade of their crawling and indexing. Codenamed Bigdaddy it started to roll out in February and was fully deployed by the end of March when the old system was turned off. Matt Cutts has been addressing some of the anomalies that SEOs have noticed in a long post on his blog.
He mentions reciprocal links four times in the post and here are the relevant paragraphs excerpted:

1. The sites that fit “no pages in Bigdaddy” criteria were sites where our algorithms had very low trust in the inlinks or the outlinks of that site. Examples that might cause that include excessive reciprocal links, linking to spammy neighborhoods on the web, or link buying/selling.
2. As these indexing changes have rolled out, we’ve improving how we handle reciprocal link exchanges and link buying/selling.
3. I think this is covered by the same guidance as above; if you were getting crawled more before and you’re trading a bunch of reciprocal links, don’t be surprised if the new crawler has different crawl priorities and doesn’t crawl as much.
4. Some folks that were doing a lot of reciprocal links might see less crawling.

The message could not be clearer, don’t use reciprocal link exchanges as the basis of your link building campaign.
December 15, 2006 As if to underline what is said above the Official Google Webmaster Central Blog has a post in which the following is written: “To sum up, even though improved algorithms have promoted a transition away from paid or exchanged links towards earned organic links, there still seems to be some confusion within the market about what the most effective link strategy is”. You can read the complete post at Building link-based popularity.
Also here is a quote the previous month from Adam Lasnik, Search Evangelist at Google, in Google Groups: “…reciprocal links have been around forever, and Google doesn’t frown on engaging in reciprocal linking in moderation. The key here is, indeed, moderation :). If, say, 90% of your backlinks are reciprocal, that’s probably not going to improve how our algorithms view your site. Or worse, if 90% of your backlinks are reciprocal and not likely to be of interest to your user. But exchanging links here and there — *especially* when done with clear editorial judgement (e.g., you’re not just accepting dozens of link exchanges willy-nilly) — that’s not the sort of thing Google looks down upon”
19 December 2007
Matt Cutts in a Pubcon question and answer session said “Trading links is a natural thing around the Web. Natural reciprocal links do happen but if 50 percent of your links are coming from link exchanges it begins to looks like you’re trying to build an artificial reputation and bump up the amount of links you don’t have”.