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An agreement between to sites to exchange links with each other. The sites may link to pages other then the one with the reciprocal link, still in this "exchange of favors" the PageRanks of the page with the link placement is influencial.
A reciprocal linking does not always improve a site's PageRank.
Inbound links send visitors to your web site and increase your page's PageRank, given that it is quality inbound link from a site with good or fairly good PageRank on it's own.
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A Web directory lists websites and links to them according to categories and subcategories. Mainly in the early days of the Internet they were of great importance, and you were actively submitting your site to be included in directories. To some extent and by the way users nowadays find their sources on the Internet they are being replaced by improved search engines.
Still it is common SEO task to get your site listed in Web directories.
Prominent directories are e.g. the Yahoo! Directory and DMOZ.
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Keyword Effectiveness Index
Anchor text is the visible part (text) of a hyperlink.
e.g. here "LingoZ is great" is the anchor text:
LingoZ is great
Search Engine Optimization
Improving the volume and also quality of the traffic to a web site coming from search engines and their organic search results. SEO will optimize the site for a specific keyword or set of keywords, so the site will gain a higher ranking in the search engines' results pages. The earlier a site is shown on a search engine, the more traffic will be drawn to the site.