However, they get to decide which links they consider "valuable" and which not. Which in turns affects your rankings in Google's SERPs. They claim that they do punish websites that use paid links, but in reality it is safe to assume that they do NOT catch every offender (probably far from it).
I personally do not pay for links, mainly because of the fear of getting caught (and punished) by Google. ViperChill.com is a great resource for less Google-certified SEO techniques.
Additionally, you might find this article interesting that goes into great detail about the value of links in general and the market for paid links: http://blog.linksspy.com/paid-links-price-study/
Disclaimer: I am the author of that article and also the maker of https://www.linksspy.com
There are people who make a tonne of cash buying links to websites (not just those who sell the links!) but these businesses set themselves up so that if a domain is penalised it doesn't really make much difference to them.
For a blog, particularly one you want to grow organically, I would not buy links as you build equity in the blog domain through other channels (recognition on HN for example). Buying links represents a risk in this case and for little reward.
Ethics doesn't come into it as long as you accept that spending money on marketing is ethical.
Most SEOs will advise you to err on the side of caution, but most SEOs work with large businesses that already have a lot of link equity and brand dollars thus making the point kind of moot.
People say create good content, but good luck creating the best content in the world and thinking that Google will feel obliged to rank you.
The reality is that with any venture you have to take risks, specially in the beginning, and if done smartly, buying links is a pretty balanced risk-reward scenario to kick start your property.
Lastly, in most cases a few well placed links are all you need. Once you start gaining traction you'll automatically get the motivation to create more/better content and do other forms of link building which are safer but much more time consuming.
Good content rules the day so spend that money on more and better articles/content . . . instead of paying for links.
Follow SEO best practices and keep a white hat on.
Do the pills that make you lose weight actually work - long term? Sorry itengelhardt, I disagree. IMO, this is just another get-rich-quick scheme, like the pills I mentioned. Allured by the thought of losing weight, or being on the front page of Google is just that, an allure. It's the same mental trap the mythical siren used to drive sailors into rocks. A few of the respondents here cite content as killer, which I agree with, but there's also the element of bad ass customer experience that must be present. Treat your customer unlike the competition and try to author more content that the competition, and you'll rise to the top of your context, but it will take time. Good luck.
I'm sorry if not enough people are driving by your restaurant but that does not justify putting up a detour sign in order to trick people into taking the road that passes by your business. If you want more business, make a better product. Don't waste everyone's time detouring them in hopes they will stop on their way by.
For example, if Verizon can't make money if they actually honored their "unlimited data plans", they should stop offering unlimited data plans.