I don't know Google's position. However, I do have thoughts about this...
Great websites link to other great websites all of the time. If you have a great website you can feel confident about linking to another great website that links to you.... but this is usually not done by agreement, it is done for the reason of attribution [such as in a footnote or reference] or in a helpful gesture to your visitor [done instead of giving an unlinked mention because you are damn selfish or scared to link to another great website that competes in your space]. People who run great websites are too busy running a great websites and don't have time to fart around swapping links. They don't gotta do it.
I think that obvious gaming of the system isn't going to work much of the time. Google is smart enough to know that one crappy website linking to another crappy website is done to game the system. Nobody links to crappy websites, except other crappy websites who can't get a link any other way AND people who are paid to link to crappy websites.
Our practice on linking is... we only link to pages on other websites that have content that is superior in some way to the content that we have on our page.... OR.... link to pages where attribution is appropriate - much like the footnotes in wikipedia.