What does Anchor Text mean in SEO?

This is any text which forms part of a link. So in the following link: How to SEO the anchor text is "How to SEO".

Internal link anchor text

Links within your own website should always use accurate text which describes the subject of the page the link will take a visitor to so you should always look to make the most of it.

Graphics, instead of text links, are also to be avoided as much as possible because search engines cannot always see what the graphic is.

If you have links on your website which have the anchor text 'pink roses' and those links take your visitors to a page about 'pink roses' this is yet another signal to search engines that your Pink Roses page is genuine - why would you want to deceive your own visitors?

One of the most common anchor text mistakes is to use "click here" which means nothing to the search engines and is no indicator of what the destination page is about. Avoid it.

To find out more about using anchor text within links on your own website see Cross Linking.

Off site anchor text

There was a time when what was in the anchor text of links from other websites to your website had some importance. However because people started massive link building programs where every link contained the anchor text [keyword phrase I want to rank for] search engines started to discount this as a factor.

As of late 2012 Google actually now looks for a natural set of links from other websites to yours. In real life people simply don't create links that look like [keyword phrase I want to rank for]. They make links such as check out this website and I read about it here, etc.

You will still find plenty of companies offering to build links the old way. Another case of cowboy companies feeding off webmaster ignorance so make sure you are not one of them.

If Google finds most of the links from around the Internet to your website all contain the same phrase they will discount them as 'unnatural'.

In extreme cases, if Google feels you had a hand in the creation of these links, your website (or part of it) will be removed from Google's index in what they call their 'Unnatural links penalty'.

On this note do not be mislead by people trying to claim x% of links should be your brand name, y% should be something else. This is just as unnatural as all the keywords being the same.

Let links come naturally and never ask another webmaster to use a specific word in the anchor text. It is not worth anything. Google and other search engines will look at the overall context of the page with the link on it to decide if the link is relevant or not to your topic and therefore how much link juice should flow your way.