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Link Wheels are black hat when done in appropriately. There are many ways to create one and you have to make it look natural for the search engines, but the basic premise to Link Wheel is to use WEB 2.0 properties and connecting them together while pointing the same ones to the main site. Make sure to use unique content. I have done them myself and they do indeed work, again, when done properly, and you can use a contextual link building with them too.
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