Matt Cutts has long been giving strong but indirect hints that selling text links ads (without using nofollow) or writing sponsored product reviews could harm the rankings of your blog or website in Google search results.
Google is not against text link advertising, they just don't want sites to pass link juice to advertisers. Read Matt's take on the issue:
You want my links for traffic.. totally fine..just don't make it so they affect search engines..so that's why we say use nofollow..or use a redirect which is through robots.txt
Paid links that affect search engines (whether paid text links or a paid review) can cause a site to lose trust in Google.
Two months ago, we saw that organic search rankings of a Page Rank 7 website were penalized by Google for selling text links. The ban was quickly lifted (in less than a week) after the site owner removed the paid links.
Now another instance has surfaced where Google penalized the PageRank of a site after detecting paid links.
The Stanford Daily website, which is part of Standford University, was a PR 9 website but with the recent update, Google has dropped the to PR7. The reason, you guessed it right, is paid text links.
Danny Sullivan, who discovered the drop, talked to Google about the issue and Google confirmed that PageRank scores are being lowered for some sites that sell links.
Not just PageRank, Google said that some sites that are selling links may indeed end up being dropped from its search engine or have penalties attached, to prevent them from ranking well.
Not everyone here may agree with the rules imposed by Google Government but there's no denying that Google is the single largest source of search traffic to most websites today.
By selling paid links on your site (without using nofollow), you may be making money in the short run but once the search rankings and PageRank is penalized by Google, the incoming search traffic and link selling power of your site will dilute anyway.