What are Backlinks?
Backlinks are a link from another website to your website; The search engines love them because it is a way to finding new content to index. Backlinks are one of the most important aspects you need to consider when you're trying to build a higher ranking in the search engines. The search engines can perhaps find and index your site without backlinks, but without backing backlinks the search engines will never suggest your site to any of their visitors. Every backlink to your site is like a vote for your website (well page on your website) from another website.
When your building backlinks, it's important to make sure you don't get too of them at the same time, It's best to try and build them over time, it'll appear to be more natural to the search engines that way, and won't raise suspicion or get your site flaged. Search engines will find backlinks to your site over time as well, as they visit new websites and and revisit older ones. The search engines take note of where they find the backlinks, and what the pages are about, and how important they consider the page is. The search engines use all this information to build their search indexes and display results to visitors.
To some sites, Backlinks are used as a way to get visitors to paid for listings on their sites, this is mainly restricted to paid directories, there are dozens out there, but also you must consider that directories paid or free, are really just a well structured link farm, and aren't the best source of backlinks for your websites. The best way of building backlinks is trying to get other sites to link back to your site on a page that is relevant to your content, as an example, if your website was about cars, and the page you wanted to improve your search lists for was about ute's, you'd try to get backlinks on pages that covered ute's first, then cars, and try to avoid to other, because they wouldn't be on the same general subject, and would be practically worthless. Another way to think about it is, if you are at work, and 2 people say you're doing a good job, is not as good as 20 people saying you are a doing a good job, which person would you go to first?
When building backlinks there are several things you should try to avoid, the first one is un related content, if your site is about baby toys, you don't want backlinks from car sites, webmaster sites etc, as they wouldn't be considered relevant and pretty much discounted by the search engines. Another one is avoid services that offer packages like "get your site submitted to 700,000 search engines", in the end they will be harmful to your site and not beneficial to it.