Link Popularity
Link Exchanging is important because most of the search engines use the number of links that point to your site, (called “Back Links”), to determine how popular your site is. Link popularity is the number external sites that point or link to your site. It is used as part of an algorithm to determine where your site will come up when a search is requested i.e. Search Engine Ranking. The higher your search engine ranking the more traffic you will receive
A very good explanation here.
