Looks a pretty nasty thing to me.

It all began with Google's aggressive attempts to curb link popularity manipulation by penalizing sites that purchase site- wide text link ads to get lots of incoming links in a hurry. (eg: If the ad selling site had 1,000 pages, the advertiser's link would instantly be on 1,000 pages.)

Google began filtering sites that indulged in this kind of linkage and either penalized or flat-out removed the site from its database. Bad news for that business. Excellent news for their competition. Can you guess what's coming next?

Certain scoundrels began thinking: "If buying site-wide text link ads en masse will get my site into hot water with Google, why not buy them for my competitor's site instead? Then just sit back and wait for Google to solve my number one business headache... the competition." (Cue evil laughter sound track.)

This, ladies and gentlemen, is Google Bowling. Simple. Devious. Devastating. And not just in theory; it's really happening out there.

Source Webpronews.com

I think Google is careful with banning a site for excessive site wide linking and you do get credited for site wide linking up to a certain point. Here are some examples:
i. Many of the free web directory scripts ask you to link to their site site wide, there are thousands of script linking to PHPLD for example, the site has not been banned, as matter of fact it has become PR7 gets loads of traffic.
ii. There are lots of web directories sponsoring web design templates, this directories are thriving, they are one of the most popular on the net.


BUT I know that about 3 years ago, Template monster was banned bay Google, because they there have hundreds of thousands of reseller, all linking back to template monster with text link. I think Google as them to remove those link for the ban to be removed so template monster changed how their reseller link to then from direct text link to JavaScript based non link which does not pass PR or rankling from reseller to template monster, so yes, excessive site wide links pointing to you site can get you on trouble but it really really need to be HUGE, perhaps thousands of site wide link and not just a few sites linking to you site wide.

Thank you for the clear up! I got very useful answers.