Effectively an online version of a paper based directory. Directories typically manually catalogue web sites based on their niche / business type. Like the paper based variants, some charge for inclusion. It’s acknowledged that all directories are not born equal. Search engines are more likely to place weight on links from DMOZ and the Yahoo! Directory. If a directory does not exercise editorial control over listings – i.e. if they will include any site which pays for a listing, then these links will not count favourably in terms of SEO. However, it should be noted, that strictly speaking you should be including your site in directories because you believe your customers may find you via the directory, not because you hope it might assist you in your SEO efforts.
See Also: DMOZ, Yahoo! Directory, Link building