I often see posts on large webmaster forums such as Digital Point, Sitepoint & UK Webmaster World about “Is What I’m doing Illegal or Unethical?” when it comes to SEO. I think I should explain what each one is.
Illegal is when you break the law. This is when what you are doing goes against the traditional law of the land you (or your website) is in. Nothing SEO wise directly could be classed as illegal, however certain aspects of web marketing or obtaining an income online could be. For example, if you are running Google Adsense ads, and you can get ways to click on the ads, then yes that is illegal (as it’s fraud).
Unethical is when you don’t break the law, but you go against moral standards. One such example could be going out of your way to damage a competitor in the SERPS. Generally you don’t do such a thing online (you improve your own SERPS), and it’s tricky to prove that you were responsible in damaging them. However, it wouldn’t necesseraly be illegal.
Certain things written on forums use these two words interchangably. One of the biggest one is when it comes to paid links. Paid links can be viewed as unethical, if you are solely trying to game Google, but in no way are they illegal. There is nothing stopping you buying and selling paid links. You won’t be thrown in jail, and I even question the unethical nature people hold over paid links.
So, you’re completely fine to buy and sell paid links.
However, don’t expect Google to like you.
Update: I’ve found this great article on seo2.0 about what “Unethical” SEO is about, really thought provoking (and proves that I can be wrong at times!) – 7 Rules of Ethical SEO.