Anchor text is the visible hyperlinked text on the page. For example, let's examine this code:
<a href="http://www.sitepoint.com/forums/">Webmaster Forums</a>
The anchor text for this link is "Webmaster Forums". This is important in search engine rankings because the search engines use anchor text to help determine the relevance of a page being linked to for those keywords. By having this link pointing to their forum's web page, SitePoint Forums will perform better in searches for the phrase "webmaster forums" (and other similar phrases as well).
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Source: http://www.imbforum.com/advertising-networks-pay-per-click-seo-traffic/15843-what-anchor-text.html
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