The guideline for 3 Way Linking

Citation analysis works well in academic environments but kinda falls a part in a commercially driven direct marketing environment.Many search algorithms may be able to detect link trading as an artificial means of boosting the popularity of both sites and discount the value of these links.
By doing a three way link from sites hosted on different servers a webmaster can build link popularity without the search engine being able to detect the link trading as easily.The Problem with 3 Way Link Exchanges :
Most people engaging in 3 way link exchanges are doing it with the express intent to manipulate search results. This typically means they are trying to make automated bots think their ideas are better than they are, and are willing to do deceptive things to do it.
There are legitimate reasons to do three way links, but most of the three way link partnerships.The real problem is that if their two sites are not connected and they are primarily working to benefit the link popularity of their main site then it does not really
hurt them if the site linking to you gets banned. If those sites get banned then they parse no link popularity to you.In doing this webmasters can agressively market their high margin websites while keeping them somewhat shielded from the dangerous effects of their aggressive promotion.
many marketers might set up about 30 or more secondary sites to echange links with. For Example:Some people will set up a bunk directory and ask for you to link back to one of their partner sites. In doing this they get links that would cost them thousands of dollars a month for
making an investment.They do not mind linking out to somewhat crapy sites because they are getting tons of free marketing. there are more directories partnering up to promote more and more sleezy high margin pharmacy and debt type websites.

Conclusion of 3 Way Linking:
If you are trading links with a debt reduction site on your personal hobby site to list in a directory of some sort it is not a fair trade.
Many other sites will be suspicious of you and not want to trade links with you if you have shady off topic links on your site.
If people you do not know want you to trade three way links you should do a bit of investigating before just saying yes.