"Links" is generally thought of as one of the heaviest factors in the algorithms used by the various engines for determining ranking.
To put it briefly, every time a different website links to you, it is considered a symbol of support. A validation of your site, perhaps. Every site that gives you a link is helping you increase your ranking and your site will come up higher in the search engine results.
How you get those links is a whole different story. You can do it very tediously, using the manual method. You find sites on topics similar to yours, or other sites that you for some reason think their readers might have a reason to be interested in your site. You contact the owner of the site and ask him to display a link to your site. You can exchange links, with you linking back to his site as well.
This method is great because it creates connections between sites - real connections. You might also stay in contact with the owner, share information with him or her when you come across info relevant to their topics, etc.
Obviously, a very important factor in getting links from other websites is having content that is useful, relevant, timely and interesting. Nobody wants to link to a boring and outdated website.
The problem with building links manually is that it takes a lot of time to get enough links that it makes a difference. You can persevere, but don't expect it to all happen at once.
Later we will talk more about other methods of getting links.
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