This is visible part of a hyperlink on a web page which is clickable. The words which form the anchor text can determine search engine ranking for the keywords utilised within the anchor text, as search engines (Google in particular) associate the keywords contained in the anchor text to the page being linked to. In the past manipulation of anchor text has resulted in Google Bombing – famously George W Bush was returned first in search results for the search ‘miserable failure’ – however Google claim they have now fixed this. See Google Bombs for more information

See Back Links, Link Building, Paid Links, Reciprocal Links, Link Farms