In short, paid content doesn’t affect short term SEO that much, but it does leverage domain gravitas and long-tail search results by buying up authoritative domains (such as Demand Media’s purchase of eHow.com), and filling it with content that may not get searched often, but when it does, they have a good shot at being number 1 in the results.
Google wants websites to use nofollow tags to clamp down on spam comments and spam entries in guestbooks. But they don’t want sites to use nofollow tags to direct their “link juice” toward new or struggling internal pages of their own sites. And Google has convinced some of the hot sites right now (like Twitter) to make all the links from people’s bio pages nofollow, even if that person has Tweeted his or her heart out to build a real following with real content. As you might surmise, there are lots of Twitterers who resent this.
Google has not yet figured out a way of teasing out the sites that are using paid content to hedge their search engine bets for obscure searches, but I’m sure they’d like to figure out a way to do so. Google’s steady drum-beat is “content is king,” and though adaptations like the nofollow tag may have their usefulness in squashing comment spam, Google really can’t blame webmasters for learning to use these adaptive tools to help their own sites.