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I personally do not believe google on what they have written on that page.
If that was the case there would be a market for placing competitors sites on link farms and I do not see much of that.
It doesn't work like that. If a spammy link exchange links to example.com, example.com won't be penalised for the incoming link. However, the whole point of the "exchange" is that example.com links back to the spammy site, and for that outgoing link it will be penalised. Link farms that don't require a link back will still be identified as spammy, and therefore the incoming link from them won't contribute anything to search engine rankings, so there's no optimisation happening.
As far as Latent Semantic Indexing goes: try a search for "sun factor" and one for "sun factorial" (both without quotes) - the first returns results about protection from sunburn, the second returns results about numerical algorithms in Java, which you'll remember was created by Sun Microsystems. Not convinced? Try "cat army" as opposed to "cat navy". Guess which one returns results about cats, and which about old fashioned forms of punishment?
Consider one more point: I think you'll find that none of the people you quote have ever actually worked as a developer for a company that operates a major search engine, and they are all trying to make money out of you. I have worked for such a company, and I won't make a penny out of this advice. Who do you think it makes sense to believe?
One more link for luck: Quality links to your site.
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