Joe:
SEO is a combination of many tactics and formulas, and linking is a part of that. In general, linking is still very influential with the search engines if it is done right.
These days, highly targeted link swaps with related, quality websites is what we are seeing help people rise in the search engine rankings. The websites that swap links with thousands of irrelevant, junk websites are not fairing as well as they did 3 years ago with this "tricks".
The best thing about highly targeted, relevant linking with quality websites is that it can improve both your search engine ranking as well as your own website's visitors experience.