Link bait is the act of adding content to a website with the aim of attracting links from other sites. The content can take a variety of different forms from a unique tool or a breaking news story to a well written article or controversial image.
Sometimes link bait is intentional but quite often the best link bait is conceived quite by accident.
My favorite example of a piece of link bait is the Adobe Acrobat Reader software. The download page has over 15 million links and is probably the most linked internal page on the web today.