[UPDATE: I emailed Linking for Dollars and they have now updated their code to include the rel="nofollow" attribute. They now fall within the Google Webmaster Guidelines. Nice work!]
Much like I nod my head to the inventor of Pet rocks, I would nod to whoever came up with Facebook gifts. If you can get people to pay $15 (adjusted for inflation) for a rock, or $1 to send an icon (eg, "gift") with a message, I say "bravo!" The sillier the idea, the more impressed I am when someone monetizes it. Really - I'm impressed with their brilliance in marketing.
In a similar fashion, I say "bravo" to Empowering Youth's Linking for Dollars* initiative. Empowering Youth* is, presumably, trying to raise its pagerank (or if not pagerank specifically, they're trying to market their company). Instead of paying people to link to them, which breaks Google Webmaster Guidelines, they'll donate $1 to St. Jude Children’s Research Hospital for each person that links to them. It doesn't seem quite so unethical if the money is going to a charity, does it?
Empowering Youth, Inc, is sponsoring an effort to raise funds for St. Jude Children's Research Hospital. Last year, "Linking for Dollars" raised $500! You can help. Empowering Youth will pay one dollar to St. Jude, just for posting this announcement. Details are here
However, all the reasons that search engines don't like paid links are in play here (read Matt Cutt's post about this). The basic idea is this: if I see John hanging out with Daniel, I will assume that John likes something about Daniel. Maybe he thinks Daniel is interesting, or smart, or funny, etc - I don't know what it means, but it probably means something positive about Daniel. If Daniel pays John to hang out with him, well, it doesn't really mean much, does it? Paid links are the same way, regardless of where the money goes.
Now, in all honesty, I don't think Linking for Dollars / Empowering Youth knows about any of this fancy search engine optimizer stuff. They may have never heard of paid links, and they probably don't know that it's "illegal." They probably said "hey, we want to get the name out about our company - and wouldn't it be great if we could do this in a charitable way?" They came up with a great way of doing this - but it just may be one that'll get their site dropped. Yikes!
So, bravo to Linking for Dollars. I applaud your creativity and your ability to align reader's charitable inclinations (and likely your own) with marketing your company. Frankly, I think charities would be more effective if they could better align people's "selfish" motivations with their own donation goals. But, you're still breaking the rules of the game - or at least the Google Webmaster Guidelines - by paying for links. Tsk tsk.