Step 1. Be interesting / funny / controversial / useful Step 2. People link to you Step 3. You have lots of backlinks and everybody's happy.
Link bait means something that makes people want to click on the link. Something controversial, mindshare-building, pre-associated interesting propaganda, etc. etc. can be coutnted as link bait.
Link bait is a piece of content designed to get natural backlinks. It could be informational, controversial, etc. It should make people want to link to it.