I've only heard of this once before and I still don't get it. Like the other posters here, I would consider it the sincerest form of flattery if someone linked to my blog from theirs. I mean, after all, most of us put those links under titles such as "Recommended Bloggers," "Blogs I like," "Blogs I Frequently Browse," etc. etc. That just shows that we think a lot of what they do and that we love their art and want to share it. I personally wouldn't worry about it unless someone asks to take them off your list. I think the LARGE majority of people would consider it flattery.
Now, I HAVE had people email me and ask if they can link to my blog and I always give permission, but I just figure they're new bloggers and they think they have to ask permission. Like another poster said, if that person didn't ever want someone to link to their blog, they should make it private or password protected or something.
I love linking to other blogs....that's how I found many of the blogs I read today. If it weren't for those links, I wouldn't be reading!
I check out the stats on my Typepad account and try to make sure I visit the blogs that link to mine and leave comments when I can.
We're all a big community linked up in some way or another and I like to spread the love as much as I can.