Can any one tell me how does linking to other websites can help your Google rankings????

You need to build do follow tag links from other quality and your theme related websites.

Use relevant and High PR sites will give you some adventage in making the reputation for your website.

beacuse you get link credit from that website which helps you to get better ranks.

Google allways give credit to Quality links. If you want to add your links from other websites then its good. But follow this things can help you
1) Atleast rank 1 website
2) Dofollow
3) Not related to Porn sites, Casino sides
4) Not listed in Google Black list


After updated of Google's latest algorithms link building is going tough task to do but on other hand qulity back links will work in favor to increase popularity of website in web world.

Yes, Increase your OBL Backlinks....

Your site will get display on other website which make increase in traffic from other website. This will makes increase in traffic and your page rank increases. But link exchange is not a good activity as it may leads to consider as violating Google SEO rules.

Linking to other sites also help to improve the google ranking. But you must link to good websites.