What is Link Exchange?

Dr. Sachin Goyal & Rajpal asks:
What is link exchange? Is it legal and can I use it on my blog with Adsense?

Answer:
This question is also part of a set of 5 question asked by Dr. Sachin Goyal. You can find all of them here.

Link Exchange
Link exchange is a widely used method for getting traffic, search engine rankings and high page rank (PR).

Consider two websites A and B. Now if website A has a link on it that points to website B and website B has a link on it that points to website A, then this is called a two way link exchange. Similarly, there is also a three way link exchange.

The most valued links are one way links. In this case the website A gets a link from website B, but doesn’t link back.

Google Engineer Matt Cutts recommends a webmaster to make other sites in the same industry aware of their own site. This can be achieved by link exchange. However take care not to do it extensively with a motto to push up your PR, you may be flagged as spam. Also beware of linking to bad neighbours, this can do mare harm that not linking at all!