Link exchange with other webmasters is a good way to increase the number of links to own site. Reciprocal link exchange consists in putting the links on the two sites that trade links. Site A links site B, and site B links site A. The links can be inserted on index or link page. There are lot of webmaster that, for various reasons, don’t want to do reciprocal exchange. One of the most explicated is the fact that from August 2007 Google introduced a new policy which said that excessive number of reciprocal links can be penalized. Please note that on Google policy pages the “excessive number” isn’t quantified, and I’m sure that, lets say 50 reciprocal links are not excessive (reed carefully the page). The other reason, more ancient, is that putting a link on the own page drains the PR of the page (this fact is evident from the formula for PR calculation), and at this point was born non reciprocal linkage. There are two main modes to do non reciprocal linkage.
3 way link
Webmaster 1 has site A, while Webmaster 2 has sites B, and C. In the 3 way link site A links site B, and receives link from site C. In the correct trade, site B should link site C, too, but often this not happened. If I’m Webmaster 1, those with 1 site only (site A, in this case), I normally don’t accept this kind of exchange. You can ask me, why? Because there are many webmaster that grow site C (the site that link me) for this purpose, to give a link, and after a while they didn’t care more about, or brutally cut off the links towards this site, so I don’t receive an adequate PR from this site. In the reciprocal exchange, I’m sure that the site that links me is supported at least by the link from my site.
4 way link
4 way link trade is similar as 3 way, but both webmasters have 2 sites, and they link one site, and receive the link from the other. It’s better way (each of them can be dishonest :) then 3 way link, specially if two sites of the same webmaster are linked between them.
By the way, Google continues to update ToolBar Page Rank very regularly, each 2 months. The last update was about Sept. 27, but I saw results of this update from statistics of my sites already about Sept. 10. As usually happens, some of my sites improved the position, but some others lost rank on Google.