Linking baiting/building can best be defined as the Circle of trust. This analogy perhaps explains the whole and soul of the linking act to lure search engine grades by all websites.
Popularly link building is considered an external factor that acts as a catalyst to the number game. The more the number of links the better! But it is for the more astute to believe that link building can not be considered as that simple an activity.
Though finding consent on a matter of algorithmic/ binary trust can certainly be as complicated as it sounds, it fairly and largely depends from one site to the other. As what works best for A probably would not work that well for B.
Link building is a very important factor and practice of off page promotion that leaves a direct impact on the SERP & page rankings of any website. As simple as it is, the better/ popular your site is, more the number of people there will be, to want to link with you.
Hence indirectly how search engines comprehend link exchange is a certificate of trust that you earn with the number of incoming links that you may receive.
Besides direct link exchanging and bidding, online submissions like directories, articles, tutorials have links that divert the traffic of online directories etc. to the desired websites.
This activity of link exchanging can either be one way, two way or here way. But what Google appreciates best are incoming links which are natural as incoming links to a site act as a proof/ certificate of appreciation from other sites to a particular site and based on that gives it priority over others.
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