Could someone explain how link exchange works

I am a relatively new to IM, but I believe I can answer this question.

Link exchange is when two webmasters are agreeing to post links to each other's sites, on their sites so they can both benefit from those links pointing to their sites.

So lets say I have a site on truck repair, and you have a site on selling tiers for trucks. You want to build up some links to your site, and you contact me asking me to post a link to your site on my site. You also ask me to use anchor text such as truck sales when I link to you.

In return you agree to link to me, and use the words Truck Repair in the anchor text.

This way when google checks my site, it finds a link to you. And when it checks your site, it finds a link to me. And since our sites are both relavent to the trucking industry.

I'll let other professionals comment on this statement, but I've heard that link exchange has become less effective and less popular, since it takes a lot of work, and does not provide enough benefit in return. And perhaps other methods of traffic generation should be used first.

This is a very good description, but I have heard that some search engines have started to try and edit out the link exchange links from there rank deciding engine. Does anyone know anything about this?

as the name says, you wive your permission to use your site to put some links on it, and they will put your links in other people sites