Closed Loop

Used to describe a linking structure where a group of web pages interlink heavily while there are few or no links to or from pages outside the group. General consensus is that search engines can detect closed loops and penalise pages in closed loops. It is currently unclear exactly where the cut-off point is. Is it only a closed loop if there are no links to or from pages outside the group or also if there are just too few such links? It is generally advisable to have links to outside pages that in turn also link to many outside pages.