Google Bad Neighborhoods

[fujitzu]

So what's the scoop on "bad neighborhoods".

When a "bad neighborhood" links to your site are you going to see a negative effect or no effect whatsoever?
When you link to a "bad neighborhood" you will be penalized. correct?

Link farms are "bad naighborhoods". Are some directories considered link farms?
Directories that have a paid submission or require a reciprocal link on your homepage- from what I've researched a link specifically intended to give your site rank will in turn have a negative effect on your site. So why do the directory sites doing this have descent pr and sometimes high rankings in the SERPs?

I know backlinks arent the only thing to focus on in seo but they do play a big part in the SERPs so any insight on bad neighborhoods and how to know which sites and directorys not to link to would be much appreciated.

Thanks