This month has seen the number of incoming links displayed in Google Webmaster Tools greatly reduce, which has led to a lot of speculation and overall panic by many webmasters. After looking at dozens and dozens of my own domains and reading the public statements from Google reps, it is clear that many links were removed from the tool, but they were removed from just that: the tool. I am not seeing any significant drops in ranking or traffic based on this change. It looks like they are just allowing for the reports to be easier read by the “average” person … whatever that means.
In short, when you see something like link counts drop by a lot on your site, before you panic, look at your stats. Has traffic changed? Has revenue dropped? If it hasn’t, there is no need to panic. Remember your goal here – making a profit. That is always your key indicator.
The main reason I started the SEO Revolution was out of frustration. Frustration at all of the lies and misconceptions that are posted in forums, given as advice in teleconferences, and even taught in live workshops. "So why didn't all of this work?" " Why wasn't my site successful?" " Why am I still stuck in a rut?" 
Strange the hold Google has on us isn’t it? So much so that we panic at every little thing rather than waiting for the real indicator, a significant decrease in revenue.
I`d love to not give negative input, because that just is better altogether.
Thanks for the report Jerry.
I just have to say that although there is a fair amount of good data that comes from the web tools, Much of the data is inaccurate.
I wish that they would fix that. Now we get half AS,s link data. COOL!
Thanks for the report Jerry. For small time folks like me who is just starting up, this means a lot. And i do agree, that the main goal is making profit, If the money is still coming, then theres no point to panic,but it helps to be informed, before it hits you really bad.
Hello Jerry,
I too saw a reduction of incoming links when Google changed the layout of webmasters tool. Now they are back up to about the same level, my biggest surprise was internal links which went from a little over 2600 to over 15,000! Keep up the great work!
Do you find that this has any bearing on Yahoo Site Explorer or other tools that report links?
No, YSE is not affected as this update was for Google only.
this happened to me in january but my traffic increased!!