What a link farm or isn't is a deep and somewhat slippery chase but I address many of the issues
here in an article about it on my website.
And there is also the issue of paid links too, but with those criteria one shouldn't cough up the $299 for Yahoo either. In other words, Google is definitely flexing some muscle and it is much wiser to keep your toes out from the elephants stomping ground so your concerns are definitely wise.
But so far, the widget is on all of my own sites and others and hasn't seen any bad effects. Now I also use roboform to submit my links to directories and they all have the same descriptions so I probably should stop doing that also. But then again, I can't see the sense to use a computer and do everything manually either? What next, handwritten subscriptions only because of Google? I'm not an expert on directory submission services either but I see only a few that advertise they change EACH submittal. It just adds a bunch of useless expense.
There are some features in the widget that mix and mash the data though. Each widget site has it's own unique dynamic titles and descriptions for each page and on each website. Then each widget site has its choice of whether to display free links or not and, if so, for how long so there are various combinations of actual links displayed on a page.
But your post gave me a great idea. When someone submits a link, I can provide in the registration form any number of titles and descriptions as they want and just randomly select when the page is loaded. That would be a mixer/masher for both the link submitter and the link displayer. That rocks!!!
My approach to the whole thing is this. I personally review and rate each site. I ask the other webmasters to also do that. I also have links for the public to rate a site. So the links in this directory should be as reviewed as any of the best out there so why would Google want to trash the ratings of GOOD sites? Google still relies on DMOZ and how many sites download their complete directory? Thousands. I think Google will be my friend, not my enemy but time will tell.