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The SEO advantages are debatable, but id still include them for accessibility reasons.
JOAT
interesting is also the question about ALT-Tags as an off-page factor, how much counts:
<a href="http://www.mydomain.com"><img src="grafic.gif" alt="Keyword"></a>
compared to:
<a href="http://www.mydomain.com">Keyword</a>
I think it helps but the impact is weaker in example no. 1 than in example no. 2.
JOAT makes a good point with accessibility, and it's an issue with HTML validation, too.
Bernie, it would be nice if it counts off-page, sometimes a little graphic just seems more attractive and effective for some links. Theres also the title= attribute for links, which is reported to have weight.
<img src="hello.gif" title="keyword">
Displayed "hidden text" alt is default.
It is best to keep to single, double, triple and maximum four words and not repeating more than twice (in exact order).
Also IE parses in short paragraphs --around 50 - 60 characters per line and mouse pointer defines "start of" or "end of" paragraph depending on which side of the view screen is the widest.
Netspace parses as a single string of text and mouse pointer randomly defines start or end of string.
The text in Netscape can run right off the view screen.
Keep them short! :)