Many search engines use the number and type of links pointing into a website as a measure of its importance. Because of this, links from other sites to yours are really important and the more good quality links that you can acquire the better will be the chance of your site appearing near the top of the first page of search results.
This approach was pioneered by Google as part of its ranking criteria to enable more established sites to perform well and to make it harder for new, or temporary sites, to manipulate the results. As a result, the need to develop links into a site can mean that new sites will initially find it hard to obtain rankings, particularly for the most competitive terms, whereas the likes of eBay, Amazon and the BBC can dominate the results.
Links should point to the direct domain of the recipient site and they should also be placed on other well-established or relevant sites. Preferably, the page content should be related to the subject of the linked site and, ideally, the link should be in the form of a text link, rather than graphic, with the text itself including a relevant keyword or phrase.