Links In and Links Out
Links in and out and around your website a very important in optimising your site for search engines.
Inbound Links: Link popularity is very important to your rankings. The concept behind this is that the more links that point to your site, the more authoratative it is considered for the subjects you cover. The more links that point to your site the higher your ranking will be. The quality of the sites linking to yours is a factor, so try and get your links listed on well regarded directories and other sites that are accepted as having a high standing.
Outbound Links: While not as critical as inbound ones, links out to respected and relevant sites won't do you any harm - you benefit by association. This is considered your neighbourhood. Link to spam type sites and you'll be viewed the same.
Internal Links: Links to different parts of your website help the search engines index your site correctly and build the relevancy of a page fro particular keywords and phrases.