Backlinks are links from other people’s websites back to yours. The only difference between a backlink and an innerlink is whether it's a link on your website to another page on your website (innerlink), or from one website to a different one (backlink).
For example, this link here - SEO for small creative businesses in the takes you from this blog to my homepage. Both pages are within my website, so it is an innerlink. On the other hand, here is a link the Sister Paper Co website. The link is from one website, mine, to someone else’s website, so it is a backlink.
The more backlinks to a website, the better, because Google considers a backlink to be a referral. A backlink is basically saying “I dont have any more information about this topic. If you want more information, go to this other website, where the experts are”. So if the point of SEO is to convince Google that your website is the expert, having lots of referrals in the form of backlinks is a great way to do that.
Gettting backlinks can involve simple things like working with blogs, asking them nicely or paying them to put a link to your website on their website. Easy!
However, off-page strategy can also be very very hard. One strategy involves creating completely separate websites to put backlinks on. Yeah. That's alotta work, and is really only possible for companies with teams of people dedicated to the task.
However, with small business community it's definitely reaching out to your friends, seeing if they'll add links to their websites. If you offer to link back to their website as well, then you both win!