External Links are hyperlinks that are pointing towards any website (target website) other than the website the link exists on (source website). In a nutshell, if another website links to your website, this is regarded as an external link to your website. Also, if you place a link on your website linking out to another website, this is also regarded as an external link.
When creating an external link on a website it is important to optimise the link using descriptive keywords in the anchor text. It is also very important to not use the same anchor text over and over when creating external links as this will be seen as being spammy and unnatural by the search engines and you will be penalised in the search results pages for it. Make an effort to use a broad variety of anchor text keywords and keyword phrases in order to enhance context and usefulness for your website visitors as well as for the search engines.
An external link is a link that points at an external domain.
Many of the top SEO experts agree that procuring external links is the best strategy for achieving high search engine rankings. This comes from the notion that external links are one of the most difficult ranking factors to manipulate and hence, the search engines give external links more weight in their ranking algorithm.
Search engines such as Google, Bing and Yahoo use several metrics when deciding on the value of an external link, including:
External links are accessible by the major search engines compared to a website’s traffic metrics. This is due to the fact that traffic metrics are kept in private server logs while external links are publicly visible which makes them a great metric when calculating the popularity of a web page.
Links provide relevancy, this is an extremely valuable source of clues for search engines when deciding how to rank a web page. The anchor text used in links is more often than not written by humans (as opposed to spammy link building software programs) and is normally highly reflective of the target page content. Good quality links tend to point to related content and the search engines look for this when using their algorithms to rank web pages.