Link baiting is simply creating an article that is *so* good it encourages people to want to link to it. I say *simply* but you need to be good at writing and good with titling your articles; it's an art form and some people are naturally good at it, others have to work hard whilst many never quite "get it"
You should be article writing anyway, and submitting it to PR sites and the like, but by having them on your website has the benefit of people perhaps linking to them as well. Things like history pages, definition pages, and FAQs are worthwile. If you rank well and its a high traffic topic then for them people will link to them.
Doesn't have to be an article, can be a tool or a video or any web media thats good. But even then creating the content alone isn't good enough, you have to show it to the right audience and the content you produce must appeal to them. For linkbait to work you need to promote to a tech savvy audience who have the capability to leave you a link through their blog or website. If you promote your content on digg.com you'll have to make sure your content is to their taste. If you're an accounting service it's unlikely digg people are going to want to read an article about accounting, you will have to twist your content so it's more appealing to the digg audience. Or find a tech savvy community based on finance or accounting and promote to them.. however finding such a community would be difficult.
Quality and Organic one-way links for your site. Read this one ---- http://www.mattcutts.com/blog/seo-advice-linkbait-and-linkbaiting/
It is some like creating an interesting post or helpful articles that could give interest for the readers.
Here is from wikipedia http://en.wikipedia.org/wiki/Overlinking#Link_bait Link bait is any content or feature within a website that somehow baits viewers to place links to it from other websites. Matt Cutts defines link bait as anything "interesting enough to catch people's attention. Link bait can be an extremely powerful form of marketing as it is viral in nature.
How about having a little of research and readings about this one....oh my kinda lazy to do his own thing...
Actually link baiting it's not only getting people to link to your excellent article, but starting to write the article with the intent of getting these links. I'm sure editors from popular online magazines aren't called link baiters since they don't start writing the articles with the intent to have them on top of social websites.
creating a useful tool, Writing interesting article, running event such as a contest, write valuable information etc...will make people to talk about it, discussing it on forums, blogging about it, posting it on del.icio.us/Furl/Digg/Shoutwire and linking to it from their sites.
link bait is nothing, link exchange is exchange links between two website, link bait is getting links from one website, in-return give some other products like, good article,..