Code of Ethics
Reputable search engine marketers have long been searching for a code of ethics, what is right and what is wrong when it comes to optimizing Web sites. Unfortunately much of what is wrong is also profitable for companies, who are not about to change their ways. Perhaps they feel that the profits far exceed the risks, but many search engine marketers feel the client is the one at a greater risk. After all, the client will be made to suffer if caught doing something unethical by the search engines.
Spam as it pertains to search engines is determined in one way. If the search engine spider sees a different web page than your visitor does, it's spam. Search engines take issue with some methods such as visible doorway pages that are showing the same content to the spider and the visitor, but this is slightly different. Cloaking, link farming, Javascript redirects, all are considered spam and should always be avoided.
A good way to determine the reputability of an SEM company is whether or not they guarantee results. Guaranteed results most certainly imply unethical practices.
We have a responsibility to users of search engines that when they perform a search, they will be receiving relevant results. We have a responsibility to our clients to make sure that the methods used on their site wil never be perceived as spam. There is so much money being spent trying to subvert search engine spiders - just build it right to begin with and your site will perform.
The industry is trying to setup a code of ethics, something I am in full support of. I encourage those of you who have been guaranteed results by any SEM firm to read this: BruceClay.com Code of Ethics or SEOPros.org's Best Practices.
The DMA's Search Engine Marketing Council is a good place to go for advice on ethics as well.
Build your site right, with relevant content that your visitors want to see, and your site will do well on the search engines, without the worries or concerns that your site will be banned from the search engines.
Resources:
Other links relating to ethical search engine marketing:
Searchenginewatch.com article by Danny Sullivan