“Link farm” is a site or group of websites created to boost another website’s ranking by linking to it from different pages in the so-called link farm (created either manually or using specific automated programs and services). That method can be also understood as a form of spamming the index of a search engine (known as spamdexing) which benefits manipulating the site’s rankings. In other words, link farms are stealing the traffic from the sites that genuinely earn it.
However, such a website won’t provide any value to users and is prohibited by Google and other search engines’ guidelines, as they can intrude the ranking algorithms and manipulate the site’s position in SERP.
As a result of that black-hat SEO strategy, the sites boosted by link farms often lose their ranking positions or even become deindexed as well as the linking farm sites themselves.
The reason why link farming is bad is because it creates artificial links from the sites that don’t have any intrinsic value: they usually contain a collection of different website links at best or can duplicate the content copies from other websites to hide their actual purposes.
Once your site is involved in or even associated with the link farming practice, you will be penalized heavily for this and can lose all the progress you’ve had before.