Is cross-linking websites bad?

Matt's answer:
CUTTS: Linda in Lakewood, New Jersey asks, “If I have three websites, is it a problem or is there a problem to cross link websites?” Well, three is not a lot of websites. But first, I would ask yourself are these websites really related in any kind of sense? Because if you got one website that’s about dry cleaners and one website that’s about ancient art, and one website that’s about the, you know, mobile phone reviews; it’s going to look really weird if you get down to the bottom of the page, and you know like, wait a second, I thought that I was looking at a cartoon site. You know, here I am looking at cartoons and all of a second, I’ve groused at the bottom of the page and I’m looking at auto insurance and coffee tables that has nothing whatsoever to do with this particular site. So, I would ask yourself how relevant is it? Three sites is not a lot so, it’s probably not going to be a huge issue but, 30 sites or 300 sites is absolutely the sort of thing where you’re competitor or an averaged user, who is landing on the page is going to be like, “Why are all these different sites cross-linking and what do they really have to do with each other?” Now, ideally, it might be something like a men’s clothing page and a woman’s clothing site and a children clothing site. And if they’re relevant that’s a perfect reason to link those three together. So, if it’s under the same corporate umbrella, you know, whether there’s a good reason to do it, I don’t see that there’s any problem at all and it is a relatively small number of websites to be linking. But, bear in mind as you grow and as you grow, if you have a ton of links down at the bottom of your site, a lot of regular users will get turned off by that. And a lot of competitors would be like, “Oh, why is this person cross-linking every single site?” So, a good rule of thumb is sort of asked a regular person off the street, and if they sort of look at it a little bit strangely, then you’ll know that you’ve probably gone just a little bit too far.
by Matt Cutts - Google's Head of Search Quality Team