Web is nothing more than intricate network of hyper links. A website with more links is always on a higher pedestal than the site with lesser links.One reason for this is that more links translate into more clicks and more traffic
Second and more important reason is value of your website in eyes of search engines.
Link building plays in getting increased traffic via search engines. Links to your site act like secondment in the eyes of the search engines.
A site with higher links is placed higher in search engine ranking.
But there is another angle to it.
To please the search engine or in other words, not to displease, your website links should be
- Relevant
- Consistent
- Reputable
- From the sites who are focused on same niche
If your link does not qualify the above terms, it is not considered a good link. And it would put your site in bad position if you have bundles of not so good links.
They then become bad links.
To keep it simple the links coming from good websites in your or related niche are definitely good links.
Your first priority must be to acquire maximum linkage from these sites.
There are many websites on the net who offer cheap linkage. Do not be tempted. You must qualify where you put an incoming board to your site.
A bad link is not worth the headache it brings.
You must be wary of banned sites, link farms, illegal or malicious sites.
It is worth investing your labours to build good pathways to your website.
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Tags: bad links, good links, Link building, link directories, link exchange, relevance, Search Engines

With the latest updates algorithms of google i feel that keyword stuffing and Link farming will bring worst SERP results. so keep updating your content and link the website which looks more and more natural
link exchange is one of my online marketing method, although it help on PR, but it dont really help to dramatically increase traffic, but it is nice to have.