Get the best of both!

Which works better, link baiting or link building? Neither, and you should do both in either case. Much crossover exists between the two strategies, and which will work best for you depends on your own preferences and set of skills. Links are links, as long as they are relevant. High-PR links are the best, of course, but a whole bunch of low-PR links seem to do the trick just as well. One-way links are better than reciprocal links. The point is, you need links, the more the better. Whether you get them through link baiting or link building does not really matter. Just get them. For the foreseeable future, the number of incoming links will be a big factor in search authority.

Some links garner more authority than others, and some will actually hurt you. At one of my other blogs, where I have all kinds of fun posting all kinds of funny, controversial stuff, I have attracted my share of detractors, some of whom have damaged the blog badly with horribly irrelevant and nasty incoming links. The followers of that blog (there are only a few hundred of them) seldom link to or bookmark the content because it's more of a funny ha-ha for today than a source of valuable information. As a result, the blog has been, for the most part, exiled by Google, except for a few pages that have big-time heavy authority incoming links that Google can't ignore.

Is it clear that links are important and the types of links are important? Good. Let's address the subject at hand: Link baiting and link building.

What's the difference?

Link building is a rock-steady strategy of acquiring relevant links to your site. You could write articles on higher authority sites, ask other webmasters for links, pay other webmasters for links, drop press releases, drop comments on related blogs, etc. The great advantage here is that you can manage you brand effectively and ensure the all-important contextual relevance of your little strand of the web. The disadvantage is that it takes a lot of time and probably some money unless you are the PR equivalent of a Knight of the Round Table.

Not much more to be said about link building...

Link baiting is a strategy of inflaming the passions. It can be a heck of a lot of fun and result in tremendous short-term traffic spikes. Here you post something funny or controversial, get a couple of friends to Digg it, and watch the fun as bloggers and social bookmarkers all over the web point to you. A headline like, "Britney Spears' Children are MINE, not J. Tim's (or K Fed or whatever)!" will do the trick, especially if it includes a funny blog post and graphic. The disadvantage here is that if you are in business, this sort of strategy could do more harm than good. Another pitfall of this strategy is that it can result in undesirable backlinks if you're not careful. It is quick and ego-gratifying, though.

Actually, you can be cool about link-baiting. Kicking a link to another blogger and saying, "I totally love this blog post!" might get you a backlink because the person is so flattered when they see people coming to their site from yours due to your high praise of them. (rubbing hands together, cackling maniacally, "And they will never know the true depth of your eeeevil plan to get a backlink!) So go ahead and click that link!

Another ethical way of link baiting would be to produce comprehensively informative content. People have to link back to your site if they want to reference the information, you see, as the information is so good as to defy digestion in a single reading.

The point of this is not to tell you every single way to build links, just to outline two strategies, both of which you should be deploying carefully. There is no "Vs." here.