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Quality inbound links can have a significant effect on your search engine rankings. Most of the search engine algorithms place some value on the amount and quality of inbound links pointing towards your website. The ranking of the website on which there is a link to your website factors into the amount of weight that the search engine places on this inbound link when determining your rank. Contacting websites that complement, but do not compete with your website and proposing a link exchange is one way to obtain quality inbound links. This symbiotic relationship gives both of you an inbound link that can help you increase your search engine placements.
Indeed, inbound links can greatly increase your ranking. Many search engines do not look at keywords listed in a meta tag, instead they look at how "valuable" your page is (which is determined by the number of links to your page) as the biggest part of establishing rank.