If a website has a link to my webpage it increases my Page Rank - if I don't have a link to that page that inbounds to me, does that affect my Page Rank? If I link back to them does my Page Rank get affected?

Thanks,

An inbound link is worth more (in terms of PR) if there's no reciprocal link. In other words, if you don't link back, the inbound link will be worth more.

Yep, you want to get as many non-reciprocating links as you can. Link exchanges score lower than natural links.

This is true. And there are some other things you can do to further improve your rankings via links:

whenever possible use text links. These are links on your important key phrases. For example, a firm that sells text links would use:

Buy Text Links

Here, there important phrase is "buy text links"

If you MUST use an image link (that is the site you are trying to get a link from insists on image links) then see if you can specify the alt tag for the image. Here you'd again use an important phrase.

Also, don't focus on PageRank when building inbound links. You need to look at the site you want to link to you - if its relevant to yours (ie topical) or related then it's a good link. If it's totally unrelated then it's probably not worth the effort.

That being said - there's no such thing as too many links, even if they are unrelated. You just want to be sure you don't get too many all at once. Engines are smart enough today to look at your history to see if the current growth in links is in line with what you've done in the past.

For example, if in Feb/March of 2006 your site gained 20 links but in the same period of 2007 you gained 200 links you'll likely cause a site review. Now, this isn't necessarily bad, but it could mean that you won't get credit for some of those 200 links.

Also, be sure to rotate your link text. Don't use the same text on all the links you request - that's a pretty obvious tactic that the engines can quickly figure out as "un-natural."

Google is clamping down on paid links, so you will be wasting your time and money. Reducing PR of sites with paid links either buying or selling. This could be abused, as you could target your competitors by buying them links...

Don´t forget link farms either. Linkfarms and paid links can as you say end with PR reducing, but in worst case you can also get banned from searchengines too. Don´t play with the fire when you can do this one easily on your own.

You should be safe if you're not buying text links from major sites.

Googles not going to go through every PR3-4 site to look at links and GUESS if they're paid or not, because there isn't a way to tell. They're trying though.