Increase your link popularity to improve your rankings!
Link exchange is the most successful way for increasing your visitor traffic without paying any money for advertising. Link exchange is also considered essential for the searchability of your website - search engines like sites with a great number of incoming links as these sites are perceived as more important than poorly linked sites.
In the ideal world, it would be great if you could only have incoming links to your site and no outgoing, however, in reality you can rarely have your link listed on a relevant site unless you link in return. That is why link exchange is so important. There are a few guidelines you should consider when swapping links:
Get as many incoming links as possible
The greater the number of incoming links to your site, the more popular it becomes for search engines.
Exchange links with pages with higher Google rank
The higher the Google rank of the pages linking to yours, the bigger the boost to your site rankings is. The more relevant the content of the partner sites to your own, the higher your URL shows in search results and the more people visit your page.
Interlink site's pages
A specific page's importance is also measured by the the importance and depth of the other pages on on the site that refer to the page in question. This means that you should interlink internal pages as well to increase their importance.
Having your link on Yahoo directory also counts. But when you swap with people who have the same interest as you, it's easier and free. You place their link, they place yours. There is the question of reciprocity - some people think that reciprocal link are not quality links. However, there is no proof of that statement.