An example of 3-way linking is when a person owns two Web sites, and uses one of the Web sites to offer link exchanges, in an attempt to build up the popularity of the other. In doing so, he or she adds a link to your site on the link exchange Web site, and asks in return that you link to the main site being promoted.
The higher a search engine can return your Web site when a user types in a keyword, the more traffic your Web site will receive. These optimized results are important on an ever-growing World Wide Web, and that's why Google is so revered: their algorithms produce the best results. Webmasters attempt to do all they can to accommodate the search bots, so as to increase their search results and their page rank. However, Google regularly penalizes Web sites for too many paid links and lowers page ranks. This is why 3-way linking and dedicated pages are becoming more important.
Many search algorithms are able to detect link trading as an artificial means of boosting the popularity of a Web site, thereby discounting the value of these links. By doing a 3-way link between Web sites hosted on different servers, a Webmaster can build link popularity without the search engine detecting the trade as easily.
The image illustrates the example: Site A represents you, the Webmaster of your own site. Sites B & C are owned by us. Site A links to Site B and Site C links to Site A. (If search Google for "3-way link" below, it will bring back several current Webmaster forum links and postings.)