As long as there is a financial incentive to ranking well in google and that the mechanism to rank better is to get links, people with money will buy links in the same way they buy influence in the media, politics, etc.
They treat public links as a voting mechanism. Unfortunately, in the era of social networking, and maybe outside of their own Google+ network, they probably don't even see the majority of high quality links based on honest personal recommendations any more.
Ultimately, I think this is going to be a good thing. Relying on a single, unaccountable source for most of your traffic was always a risky prospect for a small business, however good your products/services might be. I'm much happier with the situation we're seeing now, where search traffic represents maybe 30-40% of our total visits over a month, social networks are collectively a larger part, and there's also a substantial minority of direct traffic that presumably came from off-line word of mouth referrals and/or more traditional marketing channels where we use them.
I've been wondering whether something like this might explain how one of my sites, which has about two incoming public links in the entire universe and probably a page rank of 0 but seems to attract a decent level of FB/Twitter interest, hits the first SERP at least once for numerous queries in its niche.
But Google's algorithm by now is certainly more complex than "giving each link a vote". A lot of SEO is on-page SEO, too, so it doesn't depend all on links.
It also seems they will be focusing more on "author rank", which means posts written by "popular" authors (whatever that means in Google's algorithm) will more easily rank in Google than those written by less "popular" authors.
Now the function of a link has changed entirely. Many of them don't even exist to be clicked, and many of those that do are either advertising or the functional equivalent.
There are a few places where a link really is still an endorsement: for example if I put together a hacker news comment that links a blog post I think is informative. Or a (genuine) blogger that writes about a topic.
However, anytime there's a useful signal to be found in something like that the SEO jerks come and flood it. That's why we've got comment spam, we have reddit sock-puppets, we've got blogvertisments and so on.
And the so-called white hat SEOs aren't much better in this regard. They are pushing their clients to go write mediocre "content" that is largely duplicative of what's already out there. People should only be writing content if they have something -- preferably interesting and/or informative -- to say, not because it means more people will visit their brochureware site, and certainly not as a means of getting (tricking?) people to click on no-value-add affiliate links or AdSense ads. That's putting the cart before the horse.
By this do you mean popular people will rank more easily like they do now? How is popularity determined? By links?
re: How do you solve it?
You don't. At least, not how Google does it. Google is trying to act like the government of the internet and tries to manipulate behavior into things that align with Google's goals - primarily making money via AdWords. To achieve this goal, they try to discredit competing advertising paid link systems because they break Google's system. It's akin to twitter making it all but impossible to have a successful twitter client.
At some point, there is too much money in the current system to render what Google's webspam team does as much more than an elaborate game of whack-a-mole. They hit spam, more spam pops up elsewhere.
The only way for Google to make their algorithm better is to take out or dial back the "buyable" elements - the social ones like links, tweets, facebook fans, etc. They did this pretty effectively with AdWords over the years. It's harder with organic results, but not impossible. Arguably, for many people you could put 10 reasonable, relevant, non-spam results on the front page of a given search term and it would be "good enough" for many people. Something akin to DuckDuckGo.
Since this is a non-trivial problem what Google is doing is basically better than anyone else so far, and there is a lot of value in the social signals if only because it makes people care more about Google than they care about ranking on Twitter or Facebook. So, kudos to Google on what they're doing, but there is nothing inherent to search that requires a link to be a vote or for that to be such an important relevance factor.
Just like in real politics, Google must tread carefully. You can't arrest the president because someone bought votes on his behalf, just like Google can't nuke a site because it has purchased links.
The incentive doesn't disappear, as there is a great deal to be gained by being bumped up search results. They raise the costs or circumventing the system, but that just means people look elsewhere. Its an arms race.
The closer a spammer's actions appear to that of a normal person, the harder it is to find and devalue those links.
Google's updates have been in the recent past are saying (Panda, Penguin), "Well, spammers generally tend do to this, let's make that bad now."