I’m just wondering what the difference is between directories which are supposed to be good as far as the search engines are concerned, and link farms which are supposed to be bad. They both contain links to websites?
Directories are websites that has different links but they categorize it according to their niche.. While link farms are websites that has many different links and niches in a single page..
A good way to tell is by checking the pagerank. If Google doesn't like the site, it won't have a good pagerank. Read this article for more details: http://webdesign.about.com/od/seo/f/is_it_linkfarm.htm
Backlinks theme is one of the hundreds parameters that Google consider while providing rankings to you. Directories contains links in the respective catagories on the basis of website theme, however, in linkfarms, there is no conditions of themes, any one can add any theme link over there..
neither will really do you much good. You need backlinks from 'real' sites (or at least sites that look 'real' to the search engines). Think about uniqueness, think about content, think about relevancy.
if you submit link in a directory, you get your link on page which is dedicated to your site. if you submit link to a fink farm, you get your link on a page which contains links to many sites, not connected with your niche at all.
Here is what a link farm is: LINK FARM is a PAGE wherein there are lots of links... going to that link, you'll find a link way back EXACTLY to LINK FARM PAGE. From this description, you can see that directories are quite too far from link farm.
Forget about link farms, the web directories which have impressive listing and good Page rank are supposed to be good.