Here is another excerpt from Dotcomology on link popularity.

The majority of the major search engines use link popularity as an important factor in ranking relevancy. As search engines have become more sophisticated, so too has link popularity. Link popularity simply is the number of links from other websites that point to your website. This strategy has gained immense success due to the crawling nature of most search engines. Spiders crawl from link to link and store pages into their database. Link popularity is generally gained through reciprocal linking. Other websites would usually link to your website only if you have a link to their website from yours first.

Years ago, the number of websites linking to your site gauged link popularity; little emphasis was placed on the “content relevancy” of the linking site. In an effort to gain more link popularity, “link farms” began sprouting up across the web. For a nominal fee, a website owner could join link farms and enjoy increased link popularity overnight.

Search engines caught onto this tactic and created better tools for detecting legitimate links. Websites that have links from websites with “similar” or “relevant” content score higher, thus earn better placement in search engines.

This being said, you should avoid joining “link farms” because most search engines consider them a form of spam. Many engines will actually penalize sites for maintaining an abundance of links from nonrelated
websites. It is more important than ever to develop a solid “link-popularity” strategy. One excellent, although time consuming, method is to simply contact complimentary websites via email or telephone requesting a link exchange with the webmaster.

Link analysis is somewhat different than measuring link popularity. While link popularity is generally used to measure the number of pages that link to a particular site, link analysis will go beyond this and analyze the popularity of the pages that link to your pages. In a way, link analysis is a chain analysis system that accords
weighting to every page that links to the target site, with weights determined by the popularity of those pages. Search engines use link analysis in their page-ranking algorithm. Search engines also try to determine the context of those links, in other words, how closely those links relate to the search string. For example if the search string was “toys”, and if there were links from other sites that either had the word toys within the link or in close proximity of the link, the ranking algorithm determines that this is a higher priority link and ranks the page, that this is linked to, higher.

Tomorrow we will talk about trading links with other websites, commonly known as reciprocal linking.