Donna Fontenot has posted another fantastic scoop fresh from the WebMasterWorld conference. The post covers how a Google engineer explained to the crowd how Google might monitor and penalize sites that appeared to use surreptitious techniques to boost their rankings - primarily via link spam (although in this specific example, the engineer mentioned site growth):

...the algorithm looks at other similar situations and determines if the action is good or bad. For example, if a 2-page site suddenly adds 10,000 pages, there may in fact be a legitimate reason for it to do so. But the algorithm will first make the assumption that the action is "suspicious"...

Discussion on the post is ongoing at SEOChat with many feeling that links to your site shouldn't be able to hurt your rankings. From the page growth example, many seem to have realized that Google was also speaking quietly about the number of inbound links, their speed and other factors that could classify as "spammy" link building.

Also of interest is the theory that this penalization system could be turned against high ranking sites to their detriment. However, Google probably realizes that the liklihood of this use becoming widespread is relatively small, as it would be quite expensive to attempt to shut down dozens of competitors just to reach the top position(s). It's also unlikely that this type of penalty could be incurred by a "trusted" or long-standing site.