Websites that receive many inbound links can be more likely to rank higher in search engines. Basically, inbound links tell site crawlers that your website is an authority on a certain subject -- so the more inbound links you have from high quality, high authority sites, the better your website can rank in search engine results pages (SERPs).
Search engines don't treat all inbound links the same and inbound links isn't the only ranking factor they consider.
Reason #2: Referral Traffic
If someone posts an inbound link on their website or blog, people who see that link might click on it, and you'll benefit from that referral traffic. For example, many of you who clicked the link to Dharmesh's blog up there may not have visited his blog otherwise.
The volume of traffic you get from a referral traffic depends, of course, on how much traffic that blog or website receives in the first place.
What Does a Good Inbound Link Look Like?
A good inbound link:
Comes from authoritative website.
Uses proper anchor text.
What's all this anchor text stuff about? Anchor text is the text copy that is hyperlinked, like this. (The anchor text there is "like this.") Good inbound links not only have anchor text, but they also have natural anchor text. Here's what Google says is unnatural:
"Links with optimized anchor text in articles or press releases distributed on other sites.