Mostly every Search engine ranks web pages to determine the importance of websites on the web. Every individual page that is being indexed by Google would be assigned a rank out of 10. Page Rank is Google's way of deciding a page's importance. The higher the Page Rank (PR) the higher would be the importance given to that page while Google shows the search results.

Google uses an algorithm which assumes that the more links ( or 'votes' per Google ) from quality web pages to a page in your site, the likely chance of your web page's importance being higher, and so gives the page a higher ranking. The more votes a page receives, the more important that page is for Google.

There are many factors that the algorithm counts to make sure the ranking process is unbiased. Google also revises the algorithm to ensure spammers and black hat seo's are kept at a distance. The linking page's Page Rank and the number of links going from that page are important. This is done to discourage link farms.

Inbound links

Inbound links is the optimal method by which one can increase a site's total Page Rank. This leaves an impression with Google that the site has lot of votes being received and so it applies better page rank to web pages that enjoy a lot of quality inbound links to them.

Outbound links

Outbound links are usually used by websites to allow its users to get information from an outside webpage/site. Unless you get a reciprocal link back to your website from them, these links could adversely affect your site's total Page Rank. There are ways by which you can still manage to provide outbound links without damaging the Page Rank of your website. The mostly followed technique is to use the "rel" attribute.

Example:

href="http://www.thirdpartywebsite.com/" rel="nofollow"> your link

The rel attribute tells Search Engines to ignore the link and not to treat the link as a vote to that page. The link won't help the target page's Page Rank, and it won't help its rankings.

Reciprocal Links

Also known as "link exchanges", Reciprocal link building helps to generate more organic traffic to your website. A reciprocal link can be a text or banner link to a site that contains a similar text/banner link to your own site to ensure that your page has the visibility it deserves.

Persuading good quality, relevant sites to link to you can be tedious and time-consuming. The best method is to contact vendors, manufacturers or dealers who can provide a link that connects to your website, and also provide a back link to them from your webpage.

There are Link exchange directories which provide ample information on website owners who actively exchange links with each other. However make sure you do not fall into automated systems which guarantee to provide you thousands of links, as this could list your websites with link farms and would end up with getting your site black listed from Google and other Search Engines.