Many search engines are now ranking web pages that contain a lot of links to other sites higher than those that contain fewer links. This is why it is such a good idea to submit your pages to the search engines with as many links to other sites contained in them as possible. However, don’t make the mistake of thinking that you can just submit any old pages mistakes. You must make sure these links are related to the content of your pages or you could even end up blacklisted by the search engines.
Whenever you find a web site that has content similar to yours, email the webmaster and ask for a link, pointing out why it would be appropriate. If he has content on his site useful to your visitors, link to him without even offering to trade links. Link to him, then email him and ask for a link back. Make sure that you include a big description in your letter of why a reciprocal link will be of great benefit to his or her traffic. If you can’t offer traffic (the most common conundrum of newbies to SEO) then offer great credibility and expert material. If the big site says yes then the search engine will add the credibility of that link to your own and boost your ranking in the search engine pages.
The search engine that values link popularity the most is Google, For many people, the true value of the $299 a year cost of a Yahoo listing isn't the benefit of receiving click through from Yahoo, but the boost a Yahoo listing provides for their rankings on Google.
Open Directory doesn't cost anything, but getting a listing in this respected index can be time consuming, as everything is hand edited by humans on the other end.