BTW; Matt Cutts from google has stated many times that algorithmic and manual based penalties do exist and I've had many sites experience the dancing and sandbox effect, however this year I haven't had any since I've naturally developed my own system to avoid it.
These rules apply mostly to new sites, which the dance/sandbox effects mostly happen on.
Ok, here goes;
To prevent the dance/sandbox effects;
1) Make sure you have at least 3 pages of 1,000+ words combined of unique content on your site before building links.
3) To start on a new site, I find doing a press release the best thing, you get clean links from authority sites, try going with a press release service that has a PR7+ domain, that way you will get your link inside their domain, links from high authority sites act as stablizers for your ranking. Google likes these links, it shows trust, it shows it's passed a human filter, as a PR7 news site wouldn't link to a spammy viagra site, google uses this as a spam filter. Appearing in google news is a good way to look like your site has gone viral too, which will help when building a spurt of authority links at the same time. I use this step in my own service.
4) Don't build too many links targeting a high search volume keyword to begin with. This looks like obvious manipulation for traffic. Develop a list of at least 10 related keywords, and start by randomly building links to the lower traffic keywords first, then start slowly on your main high traffic keywords.
5) Try and send as much traffic to your site at the same time of building a lot of links, google does use Alexa rankings in determining page popularity, so it looks unnatural if you acquire 1,000 links and your site has had less than 100 visitors, try doing some solo ads or a free giveaway or something to drive traffic, I've found getting more IP addresses to visit your site helps.
6) Don't do forum profile blasts directly to your money site! This is probably the biggest cause of penalities and the associated dancing/sandbox effects. In fact try and steer clear of any backlink vendor that uses automated software to create your links, it's just not good to get 1000s of link farm links in a short period of time. Build your links consistently.
7) Try and get links that are surrounded by 100% unique relevant content. Google is on a war path against link farms, my theory is they don't have a problem with link creation so long it's in tandem with unique content generation, google is always hungry for more new content, the more content it has in it's index the more options it has to show users for more search queries. This is why article blasts of 1000s of links won't necessarily cause dancing/sandbox, but profile blasts do, because they're not surrounded by content, they're a obvious manipulation of the system.
8) Keep adding content to your site when it's new, every bit counts. Building new content at the same time as building new links definitely helps, gives the appearance of natural growth.
9) Add some high authority links, that is, links on the actual pages with high page rank, these are the most powerful links you can get and will propel your rankings more than any other, also they are a good defensive link to have, it's a strong vote from an authority source.
Now, if you find yourself in a google dance or sandbox, you can try this;
1) Immediately check for duplicate content on your site, and if so, remove it.
2) Add more unique content.
3) Keep building links, your natural reaction will be to stop, however you must continue building, a big drop off in link velocity won't help.
4) Whatever keyword you've been using in your link building, stop using that, get a list of 5 low search long tail related keywords and manually build backlinks using those keywords. You need to diversify your incoming anchor text.
5) Try getting a link from a very high page rank site, with one site I had last year that was dancing like crazy I added it into the yahoo directory ($299 per year) and within a week of the yahoo link being indexed the site stabilized and jumped to the bottom of page 1 for my target keyword, I think largely because yahoo is a PR9 site plus being in the directory is a signal to google the site has been manually human reviewed which means it passes a certain level of integrity.
6) Be patient, seriously, dancing or sandbox isn't something to freak out about, as long as you remain in the index you will always come back, it's just a matter of when, some penalties last 50 days, others 90 days, other 180 days, however you can change these automatic time lapses by altering your link profile and more importantly your on-page where most of the penalties originate from.
That's it, nothing special, you've probably heard most of it before, but like anything else it's just doing the basic things well all the time and you will succeed.
I'm also going to state my opinion, that in 99% of the cases of de-indexing, it's an on-site issue that the website owner doesn't or won't recognize.
You can't get de-indexed for link building. If so, no site would be left on google, since we would have all blasted each other out of the index already.
Well that's it, I hope this post helps at least one person from dancing around the serps.