I agree with you. Site linking is very important in SEO but it requires a lot of time and efforsI guess you are talking about internal linking. A good internal linking structure helps google to find the content on your site and can even improve your ranking dramatically.
I for one, added a link to review articles in my sidebar and my ranking improved enormous.
Yes site linking is a part of "backlinks" on your site which will help a bit in SEO.If you mean back links, it's a way of prioritizing your website for Google algorithms so that it ranks higher on search engine results pages. This is done by acquiring links on other webpages of good quality (not spam links as this will have the opposite effect)
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