A three way link is when a site links from your site to their site and they also offer a link from a third website.
1 – Three way linking requests are usually going to be lower quality. The chances are you will just be wasting your time reviewing the request.
2 – Most three way link requests are asking to give a link for a lower quality site to your higher quality site. If someone does not want to provide a link to an equal or better quality site, what is the point?
3 – Usually the site you are being offered a link from is not theirs. The site is probably owned by a linking specialist that was hired. The site is most likely just a reciprocal link site, which is going to be a poor quality site, plus become even worse over time.
4 – You never want to be linked to a link directory used only for three way links. The search engines will figure this out eventually.
5 – A three way link will most likely not fool Google or Yahoo. Especially if you build up thousands of them. If a website has a high percentage of inbound links from websites that are all linked from the same network of sites, it will not be hard to figure out what is going on.