Another good tutorial on link building, it classifies link building into "Organic link building" and "Artificial link building".
Organic link building involves effort on your own site, like building better contents, start a blog to increase exposure and to check out similar contents on the web to get inspiration etc. It brings out a concept that before you market anything, we should always try to improve the quality of our own goods first.
Artificial link building involve some manual work on web promotion, like link exchange, submission to search engines, writing press releases and to get involves in widgets and RSS syndications etc.
Check out the following link for more information, another comprehensive information here also : 7 Steps to make a perfect Link Bait | Linkbaiting
External Links (Links coming from other sites) was (*and still probably is) one of the major contributor of any Search Engine Optimization effort. Obviously links alone cant help you to rank well in the Search Engines, but they do play a major role to push your ranking up to the top.