You link build by getting links to your site from others. The purpose is achieving higher rankings because the search engines factor links to your page in the rankings process. It's easy to get caught up in link building though and ultimately forgetting what makes a site great and thus rankable: Useful content, even if that's common information that's re-spun in a unique way. There's only so much link building you can do that isn't regarded as un-natural these days. Pete
Link building is important to increase your sites overall popularity. It will also generate you some tarrific to your website. If you have a site related to travel, you should exchange links with travel related websites. When google sees your link from every travel website, it considers your site as a valuable one, and gives good ranking in SERPS. But remeber only link building will not help. If you have a good quality website, you will naturally get links
It is very important it serves as a vote for your site. And it is one of the factors rank in SE. You can do link building by directory and article submission, link exchange and forum posting(your link as the signature)
Quantity and Quality of back link are one of the important parameter (factor) which search engine uses to calculate worth of site. When search engine develop some alternate method than it will be of no worth. Since, people know links are important for ranking...so they do it. And Since Search engines also know people are doing it may be to make them fool...so they may be thinking of some alternate. When they find that alternate.....link building will be of no worth. So...keep an eagle eye on search engines.....
Greg Niland had an interesting interview on webmaster radio with a Professor Michael W. Berry of UT's dept of computer science. Computational science is getting closer to developing grids and algorithms that will interpret the meaning of groups of words. With such a system that learns from real world input, concerns over specific keywords and spellings will lessen. Even geographic idoms can be taken into consideration. I know similar work is happening in other places. What struck me funny about this professor is he didn't know what adsense was! But then, neither do any of my friends.