Black Hat SEO is a real problem as more and more SEO companies are set up every day. Just as a reminder, Black Hat SEO is to be opposed to White Hat SEO. Black Hat search engine optimization can be defined as the practice of using unethical techniques to make your search rankings go up.
Here is a list of the bad techniques that would get you blacklisted by the search engines.

Cloaking
As a general rule, websites designed for ease of use by visitors will attract search engine spiders. That doesnt stop some less than reputable individuals from disguising their pages in an attempt to gain an unfair advantage. What you see is most surely not what you get.
The info presented to the search engine is not the same that the human visitor gets to see. One example is to put in some text the same colour as the background. In this way, the spiders but not the human eye can pick up keywords. This enables the website owner to present well written content but give the search engine the impression that the copy is filled with keywords, thereby attracting searches for those keywords.
Rest assured though, that if the offending site were holding a high search engine position, it would be spotted, reported and banned from search engines.

Duplicate Sites
Search engines would prefer to find unique content throughout the net. When affiliate schemes first became popular, some web owners would post duplicate sites in an attempt to outrank the site being promoted and siphon off sales from the original. Subsequently, the search engines now have procedures in place to stop duplicate sites. Sites that may have been altered slightly to avoid detection can be spotted by competitors, reported and banned.

Keyword Stuffing
The easiest to spot and most common example of black hat methods, keyword stuffing relies on targeted keywords being placed en masse on a web page in the anticipation of being picked up and indexed by the search engines. Usually found written in a tiny font size at the bottom of a web page in order for the main content to make sense.

Link farms
Link farms have evolved from the strategy of building inbound links in order to raise search engine rankings. Sites have been built specifically to provide links, which are not particularly relevant to the site concerned.
Search engines expect links between websites to be based on relevant content. Sites that build links of no relevance, purely for the sake of search engine optimisation, can be banned from search engines, maybe for life.

Doorway Pages
Probably the easiest way to get blacklisted and lose even genuinely earned rankings, doorway pages are appended to a website, giving no value to a visitor. The page exists solely to attract search engines to the targeted keyword or phrase. These pages are mostly mass-produced and posted automatically by software.

Redirects
Used in connection with doorways, redirects automatically move the visitor to a genuine page. Illegal methods are constantly being devised to beat attempts by search engines to detect this practice. The search engines do commonly catch up with them and ban the sites. If not, competitors do pick up whats going on and report the offenders.
What colour is your hat?
Several of these practices are blatantly in use today. Some webmasters tread the thin line between illegality and shady practices. Search engine rankings can still be achieved by operating a black hat strategy. Generally though, any gain is at best temporary and offenders do face the prospect of being blacklisted by the search engines. SEO agencies that operate legitimately and provide good seo services, will not tolerate competitors getting an unfair advantage and will report offenders. Some bans can be permanent, but even in cases where a site is only banned for a temporary period; it is increasingly difficult to get back up the ladder.