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What it means, is that if a large percentage of your links come from sites which are not well trusted search engines could either discount those links, or produce a negative weight against your site which more than compensates for the gains given from link spamming.
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And therein lies the flaw that means it won't get complete usage in G's algo: All I have to do to hurt a competitor is set up links to him on garbage link farms, spam boards, etc. Never happen - at least not in terms of ranking sites in the SERPs.