Link Bait is a trendy term that basically means that if you create compelling content that will attract interest for good reasons then people will link to you and provide you with SEO benefits.
And to clarify why I say 'attract interest for good reasons' is because some people create controversial content that has no real relation to what they are really trying to promote as a way of attracting attention to get links. These types of activities are what make some people cringe at the term Link Bait.
Read this from mattcutts...
And below is the lists of ideas on how to do linkbaiting
Link baiting is a technique used to create links by creating content that appeals to social networks and/or bloggers.
example is if u write a article for article directory. people wil scrap it and wil provide a link as a source
one more info... Creating a report or a resource list is one of the best ways of link baiting.