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Referral links are when another domain publishes a hyperlink, usually with an advertising description/graphic, to your site. Reciprocal links are when two, or more, sites agree to publish referral links to each other.
Referral links can benefit site promotion is several ways
Directly creates traffic
Users can link from other sites to yours
Creates name recognition
Increases people's exposure to you when they view your ad
Boosts search engine positioning
SE spiders will visit more often and your link popularity is improved