Most modern search engines look at two separate things when determining how relevant your page is to a particular search query. The first thing is the text and structure of the html on the page, and the second thing is what links point to and from your page. This article focuses on the links side of the equation.

If you think of each link as a vote, it's easy to see that the page with the most links pointing to it is worth the most. In the diagram below, the equals sign represents the page with the link, and the crows foot side represents where the link is pointing to. You can see that all of the pages are linking to the authority site, and there are a few other links between the other pages. Because everybody is linking to the authority site, it will be weighted higher in the searches. However, there are other factors that we'll discuss below.

The next thing to know is that each vote is not created equal. In our diagram above, the small website is linking to the large website, which is linking to the related website. Therefore the small website is casting 2 votes - once to the authority site and once to the large website. Since there are two links, each gets 1/2 vote. If there were 6 links, each would get 1/6th of the vote.

To further complicate things, since the large website has a link pointing to it, it's worth more and so are the links pointing from it. Its link to the related website and the authority site are worth more than the pages without links to them.

Another factor to consider is the text on the link. If the link's text says "marketing", and it points to a marketing website, that website will benefit more from searches with the word marketing in it; for example, it doesn't help much if a site about cars links to a site about kitchens because the two are very different from each other, but if a site about Corvettes links to a site about old Chevy trucks, then the site will benefit a lot more because they're similar.

The last thing to consider is the links on the page itself. It benefits from links going to other credible sources but is hurt if the links go to poor quality or spam sites.

For more information, check out Web Site Link Strategy.