SEO and Link Building
A site's incoming links are the primary thing that search engines use to determine its importance. An authoritative article, amusing joke, or absolutely intriguing page will naturally attract links to it and this is what Google, MSN, Yahoo, etc rely on to give them an idea of how popular a page is. The SE algorithms are more complicated of course, but it stands to reason that other sites will link to a quality page and especially one that features related subject matter.
Therefore, links from other Websites not only attract click-through visitors, but also build the importance of a site. Link building is probably the most valuable thing you can do to build traffic to a site and all time and effort spent building backlinks is beneficial. Never underestimate the power of an incoming link!
Always bear in mind that it will take time for a link building strategy to propagate and for a new Website to become fully established. When it does of course, it will reap the huge benefits of free targeted traffic from search engines.
All inbound links are good.
I have seen it suggested that a site will lose its popularity, or even get banned, because it is being linked to from a 'bad neighborhood'. The opposite might be true (so be careful who you trade links with), but the search engines recognise that you have no control over who chooses to link to your site. At the worst, Google will not pass any pagerank from a link such as this which would effectively render it useless.
There is also a trend of late to belittle the importance of reciprocal links – I've even seen self proclaimed 'experts' claim that they are of no importance and can even have a negative impact on a site. It is true that one way links are more valuable, but provided you obtain reciprocal links only from sites with a related subject matter, and you do not use an automated service for the job, then this is utter rubbish.
More information:
Link Popularity (Wikipedia Definition), found at: http://en.wikipedia.org/wiki/Link_popularity
Reciprocal Linking (Wikipedia Definition), Found at: http://en.wikipedia.org/wiki/Reciprocal_link
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