Link exchange is the SEO technique, where one site offers links to other site in return of a reciprocal site. Web sites want more rank as Google uses the link popularity to rank the page. But today with the Google’s algorithm, the use of link exchange has preferred to stop as it can harm the sites that are involved.
Natural link exchanges are much better to use as these are fine with Google. For example, suppose I have a sports blog. I could create a section in the sidebar called “Blogs I Read”, and then link to several sports related blogs that I think have a great content. After that I can contact the blog owners and ask if they wanted to partner and link to my blog as well. The ultimate goal of this link exchange is to enable the users discover new and relevant resources, and not to manipulate search rankings.
I welcome everyone to post their knowledge about the effective use of link exchange....