The anchor text , link label , link text , or link title is the visible, clickable text in a hyperlink. The words contained in the anchor text can determine the ranking that the page will receive by search engines. Since 1998, some web browsers have added the ability to show a tooltip for a hyperlink before it is selected. Not all links have anchor texts because it may be obvious where the link will lead due to the context in which it is used. Anchor texts normally remain below 60 characters. Different browsers will display anchor texts differently. Usually, web search engines analyze anchor text from hyperlinks on web pages. Other services apply the basic principles of anchor text analysis as well. For instance, academic search engines may use citation context to classify academic articles,  and anchor text from documents linked in mind maps may be used too.
Anchor text usually gives the user relevant descriptive or contextual information about the content of the link's destination. The anchor text may or may not be related to the actual text of the URL of the link. For example, a hyperlink to the English-language Wikipedia's homepage might take this form:
The anchor text in this example is "Wikipedia"; the longer, but vital, URL
http://en.wikipedia.org/wiki/Main_Page needed to locate the target page, displays on the web page as Wikipedia, contributing to clean, easy-to-read text.
Common misunderstanding of the concept
This proper method of linking is beneficial to users and webmasters as anchor text holds significant weight in search engine rankings. The limit of the concept is building sentences only composed with linked words.
Search engine algorithms
Anchor text is weighted (ranked) highly in search engine algorithms, because the linked text is usually relevant to the landing page. The objective of search engines is to provide highly relevant search results; this is where anchor text helps, as the tendency was, more often than not, to hyperlink words relevant to the landing page. Anchor text can also serve the purpose of directing the user to internal pages on the site, which can also help to rank the website higher in the search rankings. 
Webmasters may use anchor text to procure high results in search engine results pages. Google's Webmaster Tools facilitate this optimization by letting website owners view the most common words in anchor text linking to their site.  In the past, Google bombing was possible through anchor text manipulation; however, in January 2007, Google announced it had updated its algorithm to minimize the impact of Google bombs, which refers to a prank where people attempt to cause someone else's site to rank for an obscure or meaningless query. 
In April 2012, Google announced in its March " Penguin " update that it would be changing the way it handled anchor text, implying that anchor text would no longer be as important an element for their ranking metrics.  Moving forward, Google would be paying more attention to a diversified link profile which has a mix of anchor text and other types of links. . 
However a 2016 study of anchor text influence across 16,000 keywords found that presence of exact and partial match anchor links continues to have a strong correlation with Google rankings. 
August 2016 study conducted by Moz, found that Exact and partial match domains can be affected by over optimization penalty since Google considers domain Brand and naked URL links as Exact match. 
There are different classifications of anchor text that are used within the search engine optimization community such as the following:
- Exact Match
- an anchor that is used with a keyword that mirrors the page that is being linked to. Example: " search engine optimization " is an exact match anchor because it's linking to a page about "search engine optimization".
- Partial Match
- an anchor that is used with a keyword and a variation that mirrors the page that is being linked to. Example: "different search engine optimization techniques" is a partial match anchor when it's linking to a page about " search engine optimization ".
- a brand that is used as the anchor. " Wikipedia " is a branded anchor text.
- Naked Link
- a URL that is used as an anchor. " www.wikipedia.com " is a naked link anchor.
- a generic word or phrase that is used as the anchor. "Click here" is a generic anchor. Other variations may include "go here", "visit this website", etc.
- whenever an image is linked, Google will use the "ALT" tag as the anchor text.