Outgoing Links

Outgoing links are the major factor search engines use to determine whether a sites' linkage is "trustworthy".

In theory we have no control over incoming links so the likes of Google will use outgoing links to help determine the "intent" behind a sites' linkage pattern, have too many suspect pointers and the site could get penalised for being seen as a links scheme.

So who you link to and how and why you link to them are important factors that I suspect will in future become progressively more so.

Who you link to

In Googles' guidelines they suggest not linking to a "bad neighbourhood" as it can effect your own ranking, unfortunately though nobody quite knows what that term means or how to identify one.

In a forum thread Matt Cutts of Google fame gave an interesting example.

A stop smoking site had been hit with a mysterious penalty, members took a look, thought it pretty "clean" so started speculating on possibilities.
MC joined the thread and pointed out the site had several links to a topically related site that was using hidden links to promote adult pharma sites, QED.

Either the members didn't check and pick up on it or that "bad neighbourhood" was still indexed/showing PR, in other words looked "healthy".

How you link

In our opinion outgoing links need to "justify" their placement so home page, sitewide, footer and nav bar links would tend to raise flags, particularly if off-topic.

Some people use Javascript or a nofollow attribute on outgoing links in an attempt to "save" PR.
I'd be wary of this, the loss in PR is minimal and it can signal an attempt, albeit minor, at manipulation.

Why you link

This is the area that we suspect will see major changes, particularly with Google.

The word "intent" features increasingly frequently when Googlers discuss how they determine spam, so pages need some "justification" for the presence of an outgoing link, and if that link is off-topic to the page content that may be hard to do.
While link relevance/topicality has yet to play any meaningful part in link evaluation in a positive way it does seem to be the prime indicator of potential spam in a human revue such as Matt Cutts' "Timeline" blogpost, so it would be foolish not to presume they're working on something that can be implemented algorithmically.

Recommended reading on outgoing links:

WebmasterWorld thread on the value of outgoing links.
Cavemans' posts in this forum thread.