That's right we never exchange links directly. We will link to a site that has sent us a trackback. We usually do this in a blog post that thanks them. Other than that we never exchange links and this is why.

Exchanging links only benefits your website if the exchange partner is in the same industry and your link partner sends you a do follow link from a page that has a higher PR than yours.

Other than this it is a waste of time. A well run link exchange program needs to be monitored. Your partner might change the link to no follow at anytime or they simply remove the link without notice. You will never know unless you monitor the situation.

With all the time involved managing these programs you could be gaining trusted links from other sources such as forums or blogs. Better yet, you could use this time to generate content on your website that is worth linking to and then promote it.