It's a number of "mini-sites" inter-linked in a wheel format, by posting content to web 2.0 websites and then inter-linking them.
Link wheel leverages the power of highly ranked Web 2.0 sites to build targeted backlinks back to your sites. This is a very effective strategy because you’ll be getting a lot of backlinks to your money site which will help you rank easily in search engines. You can also increase the power of your link wheel by using social bookmarking websites.
Creating links wheels is an utterly useless waste of time and spam. I advise you don't do it. There are loads of threads on DP about link wheels. Only hacks do that sort of thing. Nigel
A link wheel is a wheel of links that will link to your main site. Most of the time the links will get to be lower and lower quality the farther out in the wheel you go. You start off with web 2.0 links. You would put two links on each of your web 2.0 articles one to your main site and one to another spoke in your wheel. You then can use article directories to send links to your web 2.0 sites. Then you can use profile links to send links to your article directories. After that I would use blog comments to send links to your profile links. Remember to always this will make a full wheel and will give a ton of power to your web 2.0 sites that link directly to your main site.
It is Quite Effective Interlinking technique, You can Interlink your site on Web 2.0 Sites and article based directories as well. You can expand this link wheel to social bookmarking sites as well by sharing web 2.0 sites links on top social bookmarking sites as well..
Here's a very good article and a chart about Link Wheels: No direct link: webmasterbusinessplan.com/link-wheel-seo-and-traffic/ Of course you could have found this yourself