Link building strategies have, for most people for a long time, revolved around reciprocal link exchanges. Whilst most people understand that links are important, they generally don't understand why this is so. In a nutshell, a link to your site has traditionally been accepted by Search Engines as a vote for your site. A link from a topic or theme-related site to yours is better than a link from a site having a completely different topic. An important site's link to yours carries more weight - for example from The Open Directory, or Yahoo Directory. All pretty straightforward...
BUT... the rules have changed... significantly! All the thinking webmasters worked diligently to build links - willy-nilly - in order to subvert the search engine rankings and gain an advantage to themselves at the expense of everyone else. For a long time, there have been mutterings about this, and comments from Google staffers about possible penalties from linking to "bad neighbourhoods" and - heaven forbids it - buying links! Google et al simply don't approve of willy-nilly link-building schemes, and have recently tightened the screws a bit more, in two notable ways...
Some links are bad... for example, if you are a car sales company and you've got dozens of completely irrelevant links to international hotel sites... yeah, YOU know the ones! in Prague, Munich, Shanghai etc! That's a BAD neighbourhood over there! That IS going to put a world of hurt on you! And as for the Free For All link sites, web rings, and 3 way link schemes... that's just suicide in cyberspace! Why? Coz its a blatant and completely indefensible attempt at cheating the system!
Reciprocal Links - Almost a Waste of Effort
Reciprocal links are still of some value, providing the link titles are explicit, and if the page they link to you from has a higher Page Rank than the page from which you link to them. The concept of a link to you being a vote for you, and being added to your site's Total Vote Count has a flip side. A link from you to someone else essentially deducts one vote from your total vote count... meaning its value is minimal when compared to a 1-way incoming back-link!
1-way Outward Links Are Toxic
Ok, lets assume you are a service provider, maybe a health clinic, and you deal with hospitals, other doctors, specialists, nurses, laboratories. So, as a benefit to your visitors, you place direct links to their web resources on your links page. Is that clever?
Most certainly it is NOT! Transfusion time, because you'll be haemorrhaging Page Rank with nothing in return! Do it, but be smart about it, because there is NOTHING to be gained (by you) from linking to any site that does not link back. So make sure your links include the "nofollow" attribute that tells SE's that the link is NOT a vote by your site for that site!
Link Content Is Mission Critical
This is mission critical because Google and other have decided that they can't trust you to be honest about your site! Basically, it seems like there are two web tribes - those who know not so much about how things work, and those who know more than they should. There should also be a flourishing third tribe, who just build great sites with lots of terrific content that automatically ranks highly - but nobody's seen nuthin' from those guys for ages!
The tribe who know more than they should ruthlessly manipulate every available loophole to dominate search engine rankings, at the expense of those who have yet to read SEO For Dummies. Therefore, Google decided that its essential that there is some external correlation between what YOU say your site is about, and what OTHER people say your site is about... This is done by analysing the words in the Link Title on all links pointing to your site. Bottom line here is - if a keyword phrases does NOT appear on links to your site, you ain't gonna rank for that phrase!
For many established sites, this is the main reason they might have experienced a noticeable decline in rankings in the last few months. Most older sites will have a majority of incoming links based on their business name, and NOT on their activities / products / services / location etc. To use the common "widgets" analogy - if you are selling "widgets" and all your incoming link titles have your only business name e.g. Smiths Manufacturing Co Ltd, its now very difficult for you to rank for "widgets"!
Backlink analysis reveals this shortcoming rather quickly and, lucky for you, it is possible to remedy this by building 1-way incoming back-links using multiple Title / Description combinations that contain a good spread of relevant keywords. It does require some keyword research, and it is tedious - but if you don't do it, you are certainly not going forwards! But your competitors might be...