How Does Link Popularity Work?

Here's an example of how link popularity works:

Let's say that Ram's Pizza Palace Web site has a link to Mohan's Men's Clothing store. This probably won't help Mohan's link popularity for the keywords "men's clothing." However, if both Ram's Pizza Palace and Mohan's Men's Clothing Store are both located in the city of Chandigarh, and people are searching for "men's clothing in Chandigarh," the quality of that link, may have just gone up a little. There's now a common thread (Chandigarh) between the sites. It probably won't help for those people simply searching for men's clothing, but may help if they're searching specifically for stores in the City of Chandigarh. A higher quality link for Mohan, however, would be one from "Raghav's Clothing Store Directory," which lists a whole bunch of clothing stores that can be found on the Internet. That is exactly the kind of link that the search engines would credit toward link popularity. The key is in having that common thread between the sites

In brief we can say that: The search engine powers-that-be, have decided that if other sites are linking to your site, it must be the best, therefore, it deserves a boost in rankings. If given a thought, it makes a lot of sense. Simply getting links from other sites, isn't the way to go about getting it either. You need reciprocal links to other sites with similar or relevant content to your own site or you can actually harm your site's overall ranking!