People seem to use the term to mean 2 completely different things: 1. A back link from another site which is related to your site (or pages) topic 2. Breadcrumb navigation
wrong contextual link means the link is within content FOR EXAMPLE: this is supposed to be real content about online gambling this is supposed to be real content about online gambling this is supposed to be real content about online gambling this is supposed to be real content about online gambling this is a contextual link for online casinos this is supposed to be real content about online gambling this is supposed to be real content about online gambling this is supposed to be real content about online gambling this is supposed to be real content about online gambling this is supposed to be real content about online gambling the idea being that spiders will crawl the content as the page renders and it will find it relevant and thus giving the link more link juice than say sidebar links, blogroll links, image links, banner links....etc etc. basically links that are not surrounded by meaningful and relevant information
Colossal is correct, they work but they take time! I paid for over 300 contextual links in articles that were published on 150 sites, only problem was I sold the business the site related too 5 months ago and now the links are pushing the site up to my NEW business! DAM!!
So the contextual link are great for boost the SERP. Yes, the contextual also can give some traffic, it is very good for make your rank up in SE