Can any one tell me if the site needs to be indexed on google for google to class the link on a website as a back link.
While Shawn's response was complete and up to the point I still feel it might be helpful to add, that sites that are not indexed today might become indexed in the future. So just in case this is your criterion in a decision making whether or not to link or exchange links, take also other factors into consideration, especially the future potential of such a site (though hard to assess).