Most of the time when you exchange links with a site you see they have a high page rank and they have a high (SERP) Search Engine Result Page. To bring your page rank up this would be a good candidate to link to. But this does not necessary mean that they will stay that way. They themselves could link to someone who is a bad neighborhood and you yourself will be penalized for being linked to them. Even though you are indirectly linked to this "link farm" you will still be penalized. Google sees it as you supporting that site that is supporting that "link farm". As unfair as it may be, this is how it is.
In order to prevent yourself from being banned from the search engines it would be best to periodically check your site for bad neighborhood.
Check the inbound links of your site and see who you linked to. (Links that point to your site) http://www.backlinkwatch.com/
Check the outbound links A bad neighborhood link checker:(links that point away from your site)http://www.bad-neighborhood.com/
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