Search engines place a great deal of importance on a website's 'link reputation'. A website's link reputation is dictated by the websites that link to it. These are called the inbound links. Because the best websites should have the best inbound links, link reputation offers search engines another valuable way to assess and rank websites.
However it is more than just a case of the number of links. The link reputation of the website offering an inbound link is factored in too. Thus an inbound link from a website with a high link reputation is worth more than one from a website with a lower link reputation.
It is important to increase links from good quality websites, which are closely related to the same topic. And the anchor text (the words used in the inbound link) should use target keywords. Care must be taken not to 'trick' or 'spam' search engines by creating poor links from unrelated websites or too many too quickly as this could result in the website being penalised.
The best inbound links will generate traffic in their own right and will also improve the website's ranking on the search engines.
Outbound links are important in their own way too. The better the quality of the outbound links the higher the website's reputation as a source of reliable information and the more likely visitors are to return.
In practice a formal link building campaign will include the following steps: