Masterful Internal Linking for better Page Ranking. - Linking for SEO Part III.

Links are one of the most important factors that affect the ranking on your page. Though links internal to your site(Internal Links) are not as important as the links coming in from another location, outside of your web-site, they still play a major role in the ranking you receive when a search is conducted. Your Search Engine Optimization campaign should integrate good internal linking practices as a matter of policy.

This is Part III of the series Linking for Search Engine Optimization. You can read the previous two parts here :
Understanding links for Search Engine Optimization
and How a Search Engine Sees Links - Links for SEO Part II

Internal Links on a page can be
1) from the content on the page connecting to another page with similar content or more descriptive content.
2) Navigation on the page
3) Around an image or a button on a page.

Keyword Research:

Like in most other aspects of Search Engine Optimization, keyword research is the first step towards an effective linking strategy. It is very important to do a detailed keyword research for each page topic that you want to link to. Alternatively, if you already have a keyword list ready from when you optimized the linked to page, you can use that for linking too. 

Anchor text:

Put keywords in anchor text.  Preferably descriptions of the linked page should be the linked anchor. This is most important for Search Engine Optimization.
Do not use words like 'here', 'this' on the anchor text. With a little thought, it is very easy to make the anchor text meaningful and descriptive. The longer the anchor text the better. Its best if you can give a good description of the page you are linking to in the anchor text.

Title text:

About the same rules as Anchor text go for title text too.
Use those keywords here that you were not able to fit in to the anchor text. Just remember that the title text becomes visible when the user hovers over the link.  This behavior may not be standard across browsers. But it works for IE!

You may also give some addtitional description or sub-heads of the linked-to page inside the Title Text. 
For example, you may use "Linking for Cash And Profits" for the Anchor text, while the Title attribute may have value like 'how to make money from old web-sites".

A rookie mistake by most new website-owners is to link to only the home-page from the outside. All external links point to the home page and only the home page. At the same time, there may not be much content that is rankable on the home page. The pages worth linking to are really on the inside.

Make sure that when you get links from external sites, you link to the page that is most suitable for your visitor. This means, when a visitor wishes to read more about the subject matter, he should not have to go to your home page and then try to decipher how to get to your inner page. It should be the other way around. He should have the chance to read the matter/content and then see if he wants to visit your home page.

Another thing to remember here is that for the Search Engine every page is a separate location. Of course it does assume all pages within a domain uphold a common theme and are otherwise related, but as far as ranking is concerned, its every page for itself.

Link Juice :

Link Juice is the ratio of Page Rank or authority passed on to the target page by the linking page. Though this has more value for external linking, it is also quite relevant for internal links. The share of authority passed on to the target page depends on the number of links on the linking page. This is also known as Pass-through-ratio.

Note that the further a page is from the home page, the PageRank diminishes correspondingly. This is most important when you consider the site-architecture. Any web-page that needs to have a good ranking should be reachable within 3 clicks of the home page.

continued in Part 4: Absolute or Relative; CSS to change appearance; using Robots.txt etc.