Google's algorithm became so sophisticated, it only considered a site's incoming links from other sites in rating quality and relevance. A link to another site was a “vote” for that site. When SEOs and site owners realized that they could simply “trade” votes with reciprocal links and improve each other's standing in the SERPs, reciprocal links became very common.
Not long after that, such links began to be abused. Link farms started cropping up. Some black hat SEOs even built three-way link schemes to hide the quantity of reciprocal links they used to game the system. It didn't take too long for Google to get wise, of course, and now reciprocal links as a rule don't count much, if at all, in the way of rising your site's ranking.
