The truth about link exchange

Link exchange might sound like a good idea for most. Especially if you have a new web site, and no one knows about it. You want to drive some traffic to it, so what do you do? You see some link exchange ad somewhere and think it's a good idea. That might not be true.
What link exchange basically means is that you put a link on your web site and the site you are advertising puts a link of your web site. Mutual advertisement. It doesn't cost a thing. And if your site is new it will get you noticed. Well... that's not really true. In fact, it may cause more problems.
You see, with no actual interest, few users will wonder to your site. And the ones who do, and see you're just linking back to the site they came from, will just think it's sister site and might not want to check it out any further. Plus, it will make users think less of your site. Having a random link of another site with them linking back to you will decrease your credibility in the face of your users. They'll just think you're out for traffic.
But you might think "Yeah, well at least search engines will see my link on the other site and will boost it's page rank". Sorry to tell you, that's not true either. It is true search engines like Google give higher page ranks to pages with more links to it. That's how they work. But they also detect mutual linking from one site to another and value those link very poorly. The result being, your page rank will not be influenced that much by the double link, while the site advertising the link exchange probably has many others linking to it, and finally getting some boost.
In the end, there is little to be gained by link exchange if you're just starting up. My advice is to stay away from it and try other promoting methods.