between friends of the same gender, physical affection is very common. you will often find people walking down the street holding hands or with their arms linked, etc. touching someone (even on the face) isn't a big deal either, as long as it is the same gender. however, physical affection of any kind with the opposite gender is kind of taboo - even for people who are dating or married. you will rarely see people kissing or anything like that in public in korea.
us westerners really like our personal space, so it can seem a little strange at first, but it is very normal in korea. i personally am completely used to it now, and often find myself arm in arm walking down the street with a friend. i guess my personal space bubble has gone away heh.. ^^