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The <A> tag, used for hyperlinks, is called an ANCHOR tag.
You can use it to:
1. Link to another anchor on the page in which the <A> tag is located
2. Link to another page
3. Link to a specific anchor on another page
"Anchor text" is most commonly referred to as "Link text", and is the text that makes up the actual link itself on a web page.
Oftemtimes, I have found that SEs like to see anchor text in complete agreement with the content to which it links.
You can also get a small SEO boost by adding a title attribute to the link. On modern browsers this text also apears as a little pop-up box, when you mouseover the link text:
<a href="http://www.site-or-page_link-to.com/page.html" title="some interesting words here">This is the Anchor Text</a>