I think there are a lot of people confused about what the sandbox means and for every SEO expert there is a different meaning. Therefore I've decided to re-name what many are now referring to as 'the sandbox'. The new name - The March Filter.
In March of 2004, many different websites that had been recently launched or began engaging in SEO noticed that their efforts were under-appreciated by Google.
Even many longtime SEO experts in the field noticed that new sites they reviewed and worked on were not gaining the positions in the rankings that normally accompanied the type of effort that was going into them. Sites with many more and much better quality backlinks were going unappreciated and seemed to randomly toss in the lower portions of the SERPs - results 50-500.
The March Filter also seems to be prolonged by what many are calling the lack of a 'full update' by Google, meaning that while backlinks update and SERPs shift around, the PageRank has not been updated in the toolbar and no large algoritihim components, shifts, etc akin to the 'Florida' update have been implemented.
Some perceive this as having relation with Google's public offering, which is possible. Others see a sinister motive that forces sites to use adwords more aggressively.
Personally, my belief is that Google, as always, is attempting to combat non-relevant results in the SERPs and that a big update is on its way. In the meantime, in order Google is trying to prevent the rise in search engine marketing and promotion of sites that use Google's known fondness for multiple C-class IP block sites linking to them. In order to shut down this type of hard-to-detect link spamming, Google has put what I call the 'March Filter' on sites.
I haven't heard from anyone who has successfully taken a new site or new sites to the top for competitive keyword phrases since March. If anyone can easily disprove this, I would appreciate it. Otherwise, lets quit calling it sandbox and start calling it by its rightful name - The March Filter.
What will happen in the future?
If the theory holds, sites that follow the very stringent guidelines for ethics - more stringent than those Google lists, will probably see their work pay off when the update occurs. This means avoiding the supposedly 'undetectable' use of varying links across separate class C IP address sites as well as link-building as naturally and organically as possible. Just as over-optimization penalties existed for on-page optimization, they will exist in the future for site external link components.
Putting a date on this new update is not a good idea, although many believe between October 1 and 5 are likely. I personally lean towards a 'whenever they build a spam filter for the algorithim that they're happy with' approach. Although common sense would say there is internal pressure to have this done in time for this year's X-mas shopping season (the Friday after Thanksgiving).
What should webmasters do?
Internal content is probably a very good way to start, followed by very relevant links that will pass you traffic, not search engine rankings. Forget PR (mostly) and forget sitewide links (unless they are all relevant pages that will bring you traffic).
Just pretend you will never get visitors from Google (this isn't true, but thinking this way will get you off to a good start) and get links from sites who will send you the most qualified readers/browsers/buyers. Make Google's goals match your own and you can be assured of staying penalty free and receiving a reward in the SERPs when the new update is released.