anchor text

Link AnatomyLink tags can contain images, text, or other objects, all of which provide a clickable area on the page that users can engage to move to another page. These links are the original navigational elements of the Internet – known as hyperlinks. In the above illustration, the "<a" tag indicates the start of a link. The link referral location tells the browser (and the search engines) where the link points. In this example, the URL http://www.jonwye.com is referenced. Next, the visible portion of the link for visitors, called anchor text in the SEO world, describes the page the link points to. The linked-to page is about custom belts made by Jon Wye, thus the anchor text "Jon Wye's Custom Designed Belts." The "</a>" tag closes the link to constrain the linked text between the tags and prevent the link from encompassing other elements on the page.
This is the most basic format of a link, and it is eminently understandable to the search engines. The crawlers know that they should add this link to the engines' link graph of the web, use it to calculate query-independent variables (like Google's PageRank), and follow it to index the contents of the referenced page.
 
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