These kind of threads make me cringe.
I've apparently recently crossed the "friends think my pictures are cool" threshold, and recently I've been getting deluged with friends (and friends of friends, and sisters of friends) asking me to take engagement/kids/wedding/car/etc. pictures. They'll ask me what my "rate" is. I say "free". They say "that's ridiculous!" and insist on giving me money anyway after the shoot.
Is that bad? I don't know. I tell them up front I'm learning, and I hardly consider myself a professional, barely a student in fact, but they don't seem to listen. They just see what I dump on facebook and think I'm some sort of tiny photo god.
Seeing as I'm broke as hell, though, it is very, very hard to turn down cash repeatedly. I think if you're up front about your ability (and realize that what you think is awesome really isn't), it isn't too bad. If you tout yourself as God's gift to photography, though, well, hubris is fun to shoot down.