I have always read that google will penalize a site for buying links. My question is how would google know if a link was purchased if there was nothing to identify it as being purchased?
There is no hard and fast rule to find it. Only some basic concept is used such, If site is linked with other theme or irrelevant theme sites means it may be paid link. If you publish irrelevant content that does not match with your site or blog theme then it may be paid content.
Google does not know, they can only make guesses.
I was under the impression that Google could identify paid links by the foot print left created by backlinks to a site.
For example, if you were to use a paid link blog network (there are plenty of these around) and Google identified this network then the links would be easily identifiable by Google. The consequence would be a devaluation of the backlinks from such a network or a potential penalty to the site for link manipulation.
Just link is less important for your SEO efforts.
Try to add these links inside relevant text and try to make the text on the page, relevant to the page you link to.
Google will not ban you for buying targeted relevant links.
But it might ban you for irrelevant 1000000 links a day
Virtual Web Marketing
I also haven't tried buying links either, but I've read a post by Matt Cutts (way back in the year 2005), http://www.mattcutts.com/blog/text-links-and-pagerank/ in which he said,
But, SEOBook defended the issue of link buying in their post: http://www.seobook.com/unjust-fear-link-buying which is quite an interesting post.At this point, someone usually asks me: “But can’t you just not count the bad links? On the dailycal.org, I see the words ‘Sponsored Resources’. Can’t search engines detect paid links?” Yes, Google has a variety of algorithmic methods of detecting such links, and they work pretty well. But these links make it harder for Google (and other search engines) to determine how much to trust each link. A lot of effort is expended that could be otherwise be spent on improving core quality (relevance, coverage, freshness, etc.). And you can imagine how the people trying to get link popularity have responded. Someone forwarded me an email from a “text link broker” that included this suggestion:Most people use words like, SPONSORS, PARTNERS, FEATURED, ADVERTISERS, ADS and other synonymous terms related to advertisers. Our suggestion is to use ‘different’ titles for these ads. Something like RELATED SITES, COOL SITES, RESOURCES, ALTERNATIVE LINKS and so on.The email later suggests “to use unique locations for ad links like within content.” At the point where people are recommending ways to make paid links less detectable (e.g. by removing any labels or indication that the links are sold), I wouldn’t be surprised if search engines begin to take stronger action against link buying in the near future.
Google does not know if the selles or the buyers could not post in any public forums or any public places then google could track the paid link i guess. Google can do only guesses.