There are a number of different types of links that you will find on web pages. Most of the time they all look the same to the person visiting the page but to the person who owns the site the links can serve different purposes.
The most obvious difference to the person visiting a page is that between internal links and external links. Internal links are links to other pages on the same web site and external links are those that take you to another site. On most web sites the visitor to the page will not be able to tell which is which until after they click on the link and see the page that appears. If the page looks similar in colour and layout to the previous page then it is almost certainly on the same site and the link was internal. If it looks completely different then you are either on a different site having followed an external link or the person whose site it is hasn't followed the normal rules of site design.
On this site I make it a bit easier for you before you click on any links by colour coding them. Blue links (and those in the navigation bar) are internal (with a couple of exceptions that I'll come back to later). External links are colour coded magenta. To distinguish between links you have already visited and those that you haven't the previously visited links will have a faded appearance closer to the background colour of the page. The other thing that I do is that I have all of the external links open the page in a new browser window so that you can easily get back to my page if the new page turns out not to be what you are looking for (since most of those wont have a link back the way that internal pages will.
That's probably all the explanation needed for internal links since they are the ones that hold the web site together. External links can actually be subdivided into three groups depending on the reason that the site owner has put the links there in the first place.
Of course no web site can cover everything relating to a subject and there are also web sites out there that cover complementary material. Providing links to sites that complement your increases the usefulness of your site because it can then serve as a portal to those other sites. Often sich external links are provided simply in order to enhance the value of the existing site to visitors. Let's call these free links to distinguish them from the other two types of external link.
Many of the links that have been on the links pages of this site for a long time were first placed there because I thought that the information linked to were useful resources for visitors to this site. The few links of this type that appear in blue rather than magenta (and which open in the same window) are to other sites that I run and I am therefore not losing you when you follow those links, you are just visiting a page I wrote that is on another site instead of this one).
A second reason that external links appear on a site is as a result of two sites agreeing to exchange links. "I'll link to your site if you link to mine". These are called reciprocal links. Some site owners will swap links with anyone who asks because they think that the more sites that link to them the higher they will be ranked by the search engines. Well the search engine programmers feel (as I do ) that it is not the number of links but their relevance that is more important. Sure there are now a lot of links on the links pages of this site that are there because that site asked be to trade links with them but I actually turn down about 80% of such requests because I don't consider the other site to be ones that contain useful information that complements the information on my site. I apply the same criteria to these links as I do to the free ones - they must be useful to visitors.
The third type of external link is called an affilliate link. These are ones where the site owner will either receive a commission on purchases made on the destination site or will be paid so much for each person that follows the link (pay per click). These links can usually be identified once you have followed them because there will be codes attached to the end of the web page address to uniquely identify who is to get the commission or payment. Often these links can be identified before you click on them because the links are actually attached to advertising that appears on the web page rather than appearing as a plain text link. There are some affilliate links on this site. Some will pay me a commission if you make purchases after following the link. Some will pay me a commission if you sign up to use a free service after following the link. Some will pay per click on the links themselves. Here again I have tried to select affiliates that provide products or services that will be relevant and of interest to the people visiting the site (or in the case of some of the advertising Google selects the ads from their vast collection that they think best matches with what the page is about - given their vast info store in their search engine they do a much better job of selecting ads that interest visitors to my pages than I can).
For a short period I experimented with more generic advertising. There were very few people following the links (although some of the advertising still on the site attracts less interest but at least it's relevant). As it wasn't earning much I decided to remove it and replace it with something more relevant but not before allowing it to accumulate sufficient funds to reach the lowest payment level so that I could actually get paid for the advertising that I delivered. That turned out to be another mistake as y bank returned the cheque from the advertising company to me saying that the advertisers bank had refused to forward payment. I have now written off that advertising as a bad debt and will stick with providing affiliate links that are to related material that is worth linking to even if I don't get paid.
Any web site needs to earn money to support itself (unless the owner is doing it for the love of it). So called "free" web sites make money for the company providing the web space because they control the ads that go onto the web pages and collect all of the income from those ads - they usually prohibit the site creator from placing their own ads. The trick is in finding a way to fund the web site that doesn't annoy visitors to the site too much. Hopefully I am not annoying too many of you with the advertising on this site.
Ideally all external links should be there for the same reason - because they provide links to useful related material on other sites - but you need to be aware that not all web sites will apply this criteria to the same extent (or at all) when it comes to reciprocal and affiliate links. Not all external links are created equal but by careful selection by the site owner they can be made more valuable both to them and to the visitirs to the site.
This article written by Stephen Chapman, Felgall Pty Ltd.