On the World Wide Web, a link farm is any group of web sites that all hyperlink to every other site in the group. Although some link farms can be created by hand, most are created through automated programs and services.
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Anyone using link farming should check out Google's Panda and Penguin updates in 2012. Since then, Google is specifically looking for link farming, link buying, keyword stuffing and any link it considers to be 'not natural'.
Websites that were using these black hat practices had their Page Rank downgraded, and visitor numbers dropped dramatically as a result.
Also, you need to make sure that you are not hosting spammy links without realizing it. And always consider carefully before approving any pingback.
And on the subject of backlinks, nofollow backlinks do not help your Page Rank at all - because Google is blocked from 'counting' them as a link. The only benefit of nofollow backlinks is to get your name out there, and to maybe gain a few random visits to your own site.