Reciprocal Links

A reciprocal link, in simplest terms, is a link from Site A to site B and a link back from Site B to Site A. Many have written reciprocal links off as being completely irrelevant but that's far too simplistic. There is nothing wrong with reciprocal links in an of themselves. Its all in the execution.

Low-Quality Reciprocal Links

The lowest quality reciprocal links are those found on pages specifically designed to house reciprocal links. What you get from these "resource" pages is a bunch of barely related links from Site A to one or more dozens of other websites. All of these build their own "resource" pages that do you the favor of linking back to you and one or more dozens of other sites.
These pages are usually easy to spot because they generally provide little value to the visitors of the site, other than for a good laugh. If you find yourself linking to a site that links back this way it would probably be of benefit to you to stop linking to them. The link pointed to you likely has no value, however by associating yourself with them (via your link) you can be sending the search engines a signal that you don't care much about the quality of sites you link out to.

High-Quality Reciprocal Links

Despite the belief of some, there are reciprocal links that can pass a lot of value to you. Low-quality reciprocal links are there simply for the quid pro quo of the link. High quality reciprocal linking has nothing to do with doing someone a favor in order to get something in return. These are two links that are made independently of each other simply because you, and the "reciprocating" site find each others content valuable.
It's entirely possible that one of the linking parties has no idea the other site is linking to them because each link was given entirely on the basis of the value of the content being linked to. It wasn't per-arranged or purposeful in any way.
That doesn't mean you can't per-arrange a reciprocal link and still make it valuable. You can, you just need to make sure it looks as natural and non-per-arranged as possible. Linking and receiving a link in the midst of quality content in primary site pages can do the trick. Just be careful about how many of these reciprocal links show up at the same time.