Yes, you need to build links to your site to acquire more PageRank, or Google ‘juice’ – or what we now call domain authority or trust. Google is a link-based search engine – it does not quite understand ‘good’ or ‘quality’ content – but it does understand ‘popular’ content. It can also usually identify poor, or THIN CONTENT – and it penalises your site for that – or – at least – it takes away the traffic you once had with an algorithm change. Google doesn’t like calling actions the take a ‘penalty’ – it doesn’t look good. They blame your ranking drops on their engineers getting better at identifying quality content or links, or the inverse – low-quality content and unnatural links. If they do take action your site for paid links – they call this a ‘Manual Action’ and you will get notified about it in Webmaster Tools if you sign up.
When Google trusts you it’s because you’ve earned its trust to help it satisfy its users in the quickest and most profitable way possible. You’ve helped Google achieve its goals. It trusts you and it will reward you with higher rankings. Google will list “friends” it trusts the most (who it knows to be reputable in a particular topic) at the top of SERPs.
Ever heard of Maslow's hierarchy of needs? It's a theory of psychology that prioritizes the most fundamental human needs (like air, water, and physical safety) over more advanced needs (like esteem and social belonging). The theory is that you can't achieve the needs at the top without ensuring the more fundamental needs are met first. Love doesn't matter if you don't have food.
Many search engine marketers think who you link out to (and who links to you) helps determine a topical community of sites in any field or a hub of authority. Quite simply, you want to be in that hub, at the centre if possible (however unlikely), but at least in it. I like to think of this one as a good thing to remember in the future as search engines get even better at determining topical relevancy of pages, but I have never actually seen any granular ranking benefit (for the page in question) from linking out.
Website owners recognized the value of a high ranking and visibility in search engine results, creating an opportunity for both white hat and black hat SEO practitioners. According to industry analyst Danny Sullivan, the phrase "search engine optimization" probably came into use in 1997. Sullivan credits Bruce Clay as one of the first people to popularize the term. On May 2, 2007, Jason Gambert attempted to trademark the term SEO by convincing the Trademark Office in Arizona that SEO is a "process" involving manipulation of keywords and not a "marketing service."
For example, let’s say you were running the website of an online pet store. You might be wise to create one keyword grouping for all your dog-related products, then one for all of your parakeet-related projects, etc. The next step would be to segment each individual group into smaller subgroups (parakeet cages, parakeet toys, parakeet snacks) and then even smaller groups for each type of product (low-fat parakeet snacks, luxury parakeet snacks… you get the idea). Now your pet store can create individual pages optimized for each small keyword group.