Links are the heart and soul of the internet. When the internet was first created, it was comprised of two things... web pages and links.
As there were no search engines, the only way you could find other web pages was to follow a link. Each webmaster linked to pages they liked and as a result, ascribed authority to the pages they linked to.
This effect still occurs today. The search engines view each link as a "vote" cast by a website/webmaster that the page is relevant to the piece of linked text.
This linked text has many different names including "text link," "hypertext link," "anchor text link," "text ad" and probably a few others.
In terms of SEO, the more links that point "back" to your site/pages, the better. For optimum results you should work hard to ensure that your backlinks include the specific keyword phrases you are optimizing for.
Although there are many ways to build quality backlinks, you'll find these three to be quite effective:
1. Website Directories
There are hundreds of website directories that will allow you to list your business. Some will give you a listing for free and some require payment.
In addition to the listing, most will allow you to link to your website.
2. Article Marketing
Article marketing is a powerful link-building vehicle and should not be overlooked. You can submit your article content to hundreds of online directories and most will allow you to create three links per article.
3. Online Press Releases
Submitting an online press release is similar to article marketing except that the content is written a bit differently. The goal is to attract media attention in addition to giving content of interest to your target market.
Most press release distribution sites will allow you to "drop" a link but some will require additional payment for "anchor text" links.