Backlinks are links that lead to your web site. In general, the more backlinks that there are to your site, and the better quality sites that these backlinks are from, both tend to increase your own web site's ranking in search engines. Obviously backlinks are not the only factor that search engine use in ranking web sites, but they are known to be quite important.
Search engine optimization, or "SEO" as it usually known for short, is an important marketing activity for web site owners. Basically the idea is to achieve the highest rank possible for your site in the search results, when people search on relevant keywords. The purpose of this is obviously to increase the number of visitors to your site ("targeted traffic"), and thus hopefully boost revenue and profits, which those be derived from sales, affiliate programs, or from advertising.
Given what I have told you about backlinks, it should be obvious that increasing the number backlinks to your site is important. There are several ways that this can be done:
1. The first option is pay other sites to link to you. Apart from the cost, the downside for this, is not all sites are willing to accept paid links, and additionally some search engines have made statements which are that they are opposed to the practice (and may potentially ban sites involved in such schemes).
2. The second option is to provide interesting content on your web site, and hope that other people will link to it. This type of content is known as "link bait", however this marketing can be hit and miss – you're simply hiring that other people will decide to link to you. Beside which, other webmasters may not even know about your site (let alone wish to link to you), if you do not have a good ranking to start with.
3. The third option is to exchange links with other sites. This is free, but obviously, the main issue is that you need to link back. In the past, the process of exchanging and managing link exchanges was quite time consuming, but today, if you use software like SEO Elite, you can automate all the spade work.
4. The fourth option, and the one that gets you free one way backlinks to your site, is to write articles and submit them to article directories. This can generate lots of traffic, and since there are hundreds of different article directories, can get you hundreds of backlinks. Obviously, usually submitting even one article to hundreds of different article directories is incredibly time consuming, so you will want to get hold of software such as Article Submitter, as this can automate the job.