When a Webmaster adds a link to one of the pages of your website, he is basically qualifying the fact that the content in your website is somehow related to the content on his website.
Also it is a claim that the visitors coming to his website can find additional information on the topic by going through your website. This is the fundamental fact of incoming links that most search engines recognize.
So basically, the relevancy and rankings that a search engine imparts to your website will depend a lot on the number, quality and relevancy of incoming links to your website. There are some very specific things that I mean by the three adjectives which I have used in the last statement.
However some caution is required while proceeding on a link building campaign for a website. There are sites which will allow you to 'buy' incoming links from them. This is usually a waste of time and resources and these links do little to boost the popularity of your site. This is due to the fact that these sites are mosty unrelated to the content of your website and hence such incoming links are not valued much by search engines.
Moreover, some of these sites are specifically set up for the purpose of providing huge numbers of inbound links to different sites. Such 'link farms' distort the natural democratic process of link building which is more based on content relevance and association rather than on an overtly economic interest. Infact some search engines like Google have started black listing such 'link farms' and sites which are associated with them. As a result, such methods might do you more harm than good by getting your site blacklisted from Google's result pages.
There are still a lot of valid techniques you can use for link building. Read ahead and find out the best ways to boost link popularity of your site.
Almost all Search Engines try to use a bit of natural language processing to understand the content of the website and related it to the search terms that they are fed with.. This association of keywords with websites is driven by keywords that appear at specific places in your website. For example: