I ran across this old post from the Google Blog. Here is a taste below. I will also be linking to the authenticated Spam report page now as well as the unathenticated one. I should have been doing this sooner. My bad.
In 2007 as an extension and complement of this democratic principle, we want to further increase our users’ awareness of webmaster practices that do or do not conform to Google’s standards. Such informed users are then able to take counter-action against webspam by filing spam reports. By doing so a mutually beneficial process can be initiated. Ultimately, not only will all Google users benefit from the best possible search quality, but also will spammy webmasters realize that their attempts to unfairly manipulate their site’s ranking will pay off less and less.
Our spam report forms are provided in two different flavors: an authenticated form that requires registration in Webmaster Tools, and an unauthenticated form. Currently, we investigate every spam report from a registered user. Spam reports to the unauthenticated form are assessed in terms of impact, and a large fraction of those are reviewed as well.