I haven't done any link-swaps so far. I link to people because I like their stuff, people sometimes link to me because they like my stuff. Sometimes it happens that we link to each other, but that's not a goal, nor a requirement.
I ignore all requests for link-swaps.
If you are going to trade links it should be in the most part for the traffic only. You can never know if that bi-link is going to bring you any value -- or even, if it can penalize your site. If you want to be certain of that, you could even use a nofollow (*putting on a helmet*).
The way you phrase your question you convey the idea that in your mind there is a relation between "SEO paying off" and "quality link swap".
The real relation is between subject matter by association.
That's not a one-on-one relation. It's not you selling "cheap blue widgets" and me selling "cheap blue widgets". Why would I want to send people who come to be conviced that they should buy "cheap blue widgets" from me to you?
No, it's a relation between purpose; a goal-oriented relation.
What are you doing/selling and how does that tie in to what I'm doing/selling?
Think about link swaps as cross-site "also bought" recommendations. If your "cheap blue widgets" require a hammer you don't sell, why not recommend my site? In return my tutorial site on using "cheap blue widgets" could link to yours to get them.
A true quality link swap is a "site visitor value-added" link swap.
You're always ready for those if your site is solid
If I link to a site that I think is of value to my visitors, and then e-mail that site to let them know where the link is and at the same time ask that if they think that site compliments their own, they are welcome to link back.
If they then link back, we have 'swapped links'.
That is what the www is all about. That is how people move from one website to the next. It's pretty fundamental.
If Google et al have recently (relative to the www) decided that they don't like this and call 'manipulation' then that is their opinion - and that opinion is wrong.
Of course, if you want to be in the Google SERPs you have go against the purpose of the www and play by their rules I guess
Depending on how you define "quality" --- any time you want!
If you choose to define 'quality', for example, as "meeting Google's quality guidelines," then any swapped link you can find which meets those guidelines is just fine.
The fact is that there is absolutely nothing WRONG with link swapping, in itself. You just have to be critical of the value of the swap --- if the site you are linking to is worthwhile, then link to it. You should also not be unwilling to link to a site which _hasn't_ linked to you. Having a variety of reciprocated and non-reciprocated links can show that your linking practices are not manipulative.
It's impossible to entirely _avoid_ swapping links, to some degree or another. If you link to somebody, they can find out, and (gasp) they might then link back to you! Is this, then, a reason for you to delete your link, so that you're not discovered swapping links? Absolutely not.
Practically speaking, if you want to swap links, swap links. Just be critical of the properties you're working with; and don't swap links exclusively. The "give a link, get a link" exchange doesn't need parity.
The fact is that there is absolutely nothing WRONG with link swapping, in itself. You just have to be critical of the value of the swap.
This is true. My response above is based upon personal experience. I get lots of requests for linkswaps and have never received one from a site that I cared to link to. On the other hand, I receive several link suggestions every week and link to almost all of them. The difference is that the suggestions usually come from people who are not webmasters. They simply see good resources and let me know about them. Occasionally I receive a link suggestion from the webmaster or owner of a site. These are usually pretty good sites and many of them receive the link and a thank you note. I could probably ask for a link back but I don't.
If you have content that is good enough to email link suggestions rather than swap requests. I think that you will get a lot more links.
Not all reciprocal links are "link swaps" specifically for PR manipulation. I wrote a blog post about an article that was factually incorrect and in turn (unsolicited) they made the corrections with a citation and a link to my post.
This is a rare case though, so on the whole I would say avoid the crappy link swaps because they've been totally devalued by Google. You're much better off creating better content to get natural editorial links or doing something else.