Paid links the death of page rank?

OK, so I am a bit confused about this latest buzzing about Google. On one hand we have the controversy of AdSense and who can show ads with full porn and those that can't show them if you can see a slight hint of a nipple through a T-shirt. On the other hand now I hear about John chow and many others losing PR "page rank" due to selling text links or buying there of. I paid a visit to Matt Cutts personal blog, in his blog he discusses ways of reporting buyers and sellers. There is also a Q and A there that was interesting.
Q: Can you give me some more background on how Google views paid links?
A: Absolutely. Start with this post from 2005. It’s a pretty good review of our policies at the time (e.g. link sellers can lose trust, such as their ability to flow PageRank/anchortext. Also, we’re open to semi-automatic approaches to ignore paid links, which could include the best of algorithmic and manual approaches.). You can also read about panels at search conferences where we did a site review and how much paid links stood out in a site review. I even mentioned earlier this year that paid articles/reviews/posts should be done in a way that doesn’t affect search engines. Here’s a post from January,
OK so now it is getting pretty clear to me that it is OK to buy and sell as long as it does not affect Google. Ummm...
Q: Now when you say “paid links,” what exactly do you mean by that? Do you view all paid links as potential violations of Google’s quality guidelines?
A: Good question. As someone working on quality and relevance at Google, my bottom-line concern is clean and relevant search results on Google. As such, I care about paid links that flow PageRank and attempt to game Google’s rankings. I’m not worried about links that are paid but don’t affect search engines. So when I say “paid links” it’s pretty safe to add in your head “paid links that flow PageRank and attempt to game Google’s rankings.”
Q: Can you give me an example of the sort of things you’d be interested in hearing about?
A: Sure. Here are some paid text links on a site dedicated to Linux:
There are a few interesting things about these links. If you take off your webmaster hat and put on a user hat for a minute, you quickly start asking yourself questions like “Why is a Linux site linking to a bunch of poker, pills, and gambling sites?” Users often consider links like this spammy or low-quality. I’m sure some people will happily defend links like these, but in my experience people who search on Google don’t want links like these to affect Google’s search results.


I personally have never purchased a paid link or paid directory listing since I consider paid directories the same as paid links. Now it is time for an Asian girls confusion. Note the AdSense ad at top. This ad is displayed on a site that is selling links and directory listings and also shows AdSense ad from a company that says to sell links and generate income. OK AdSense ads have to be approved..... right?? and the site that displays the ad also is reviewed from time to time.... right?? Ummm I am just a Thai girl and My English is not so good but this confuses me. Its OK to take money from advertisers and not OK to actually buy what the advertiser is selling with your ads? I love Google to death, but I really think there should be one policy for all. Paid LINKS bad! no ad no site no rank. One policy, don't do it! not you can but you can't. Same with AdSense "search keyword: Asian girls for example" Ad word AdSense showing on Google own pages contain adult content, One policy for all even self. Adult no AdSense. Right olxfriendster personal section filled with porn and AdSense under photos but I wont mention any sites. Or is it all about revenue and he who brings in more money can use the policy #2 ?? I have to keep this site sexy in order to compete with porn and keywords, although my sites that have been online for over a decade have never offered any type of porn. How about porn having its own search engine called poogle or something, then google would not have to worry about adwords, there could be adult adwords and non. Just a confused Asian girl..........