Reciprocal link exchanges is the practice of exchanging links with another website. In other words “Link to me and I will link to you”. This is done by placing a link somewhere on your website and in exchange the owner of that website will link back to you.
The purpose of this is, for a lack of a better term, a popularity contest. The more websites that link to your website the better your search results. Before you stop reading and just exchange links with any mom and pop website be sure to read this entire page because this no longer holds true.
You need to consider what websites you exchange links with, you need to consider how you are placing the links on your website and you need to consider how the website is linking back to you. Below image illustrate what a reciprocal link exchange is: