Links and anchor text
Internal and external links
A link is a connection between two webpages. Internal links are links within your site, whereas external links are links from other websites to pages on your site.
Links are the most important component of the internet - without links, the internet would be a myriad of discrete blobs of information. Search engines use links to understand what sites are about, based on the premise that related sites link to each other and that, when they do, the text of the link relates to the content of the page being linked to.
Parts of a link
There are several components to a link. There is a page being linked from and a page being linked to. The link could either be a text link or an image link. A text link is literally a link incorporated into a piece of text, like this. An image link is like the button on the left of the page called "Click for more SEO tips".
From a search engine optimization perspective, the most important aspect of a link is the "anchor text". For a text link, this is just the item of text that makes up the link. For an image link, the anchor text is a separate part of the HTML code, the ALT text, which appears when you hover over the image. You can see this if you hover over the buttons on the left of the screen. Alt text for images is designed for web accessibility, either for graphics-free browsers or for webpage readers for the partially sighted.
Search engines can't read images, so the anchor text tells them what the image is of. For a link, the anchor text tells them what the page that is being linked to is about.
Search engine optimization using links and anchor text
It is good practice to see links between pages as a way to tell search engines what pages are about. Link text should be concise but use relevant keywords. As with page titles, the weight assigned to each word in the link is diminished as the link anchor text gets longer. This is to discourage "keyword stuffing". Word order is important.
External links carry much more weight than internal links. This is because external links are more independent than internal links. It would be easy for the site owner to use terms on internal links that do not accurately reflect the content of pages. However, most links in to the site would use an objective keyphrase, such as the site name or a descriptive term for the content on the page.
Ethical search engine optimization
Ethical SEO is a big topic, but in simple terms it means that the optimization techniques you employ are about accurately reflecting the content of the site in an optimal manner. Unethical techniques involve 'tricking' the search engine into thinking that the content of the site is different from what it actually is. An example of this would be using inappropriate link anchor text. Alternatively it could also include showing the search engine different content from what is shown to the user. An example of this would be hiding text behind an image. In the context of search engine optimization using links and anchor text, it is important to reflect accurately the content of the site in links. Unethical search engine optimization techniques can be uncovered by a combination of automated and by-hand techniques and can get sites banned from turning up in search engine results.