What's link baiting, in a nutshell, it's the best way to make other webmasters, bloggers etc... give you links for free ... just because they think your website merits it. And believe me that's not easy. One of the main advantages of link baiting is that you can get some real links which can drive you significant traffic.
In order to attract incoming links:
SHOW YOUR EXPERTISE
You are an expert in your domain, you should give some proof of this expertise. Publish some resources, news, tutorials etc ... If other websites can use your knowledge and advice they will be more than happy to link to your website as a reference. Same thing for news, articles etc ...
I.E. - I have loads of Elliance Internet marketing company images on my website to illustrate some of my articles. I think their SEO infographics section is great and very helpful so I give them some links.
In my Blog section I republish some other people's news, with a reference link etc ...
If you have an area of real expertise, it's a good thing to enable the rest of the world to benefit from it.
Try to share as much info as you can but be careful by giving some useful info without giving your secrets away.
MAKE PEOPLE LAUGH
Humor leverage to get links can be very powerful. SEO for example is kind of boring sometimes. Well poetic Prophet from Mo Serious Entertainment has written different rap songs on web marketing concepts. As an SEO professional it made me smile at the beginning then I realized, "Hey?! what this guy says is far from being stupid! The guy's good and he knows what he is talking about".
Alexandre Gueniot also managed to both make people laugh and show his expertise in his Flash CV in 2005 - managing to drive 700,000 unique visitors to it and receive more than 100 job offers. He is now working for Microsoft in Seattle.
You can also publish some funny videos, pictures stories etc ...
AMAZE OR SHOCK PEOPLE
All publicity is good publicity as long as people give you some links and talk about you. If you publish something unusual, that will amaze or shock internet users can lead to links to your website.
I.E. NY daily news publish some pictures of the Sport's Most Gruesome Injuries it has hit the homepage of Digg (PR8). It is slightly shocking without so I am sure that loads of website will implement a link to it and thanks to its appearance on Digg, the website might have had a massive boost of traffic.
EXPRESS YOUR OPINIONS
Attention as this leverage technique doesn't take part only on your website. You obviously can write some opinions on your website and generate some comments and answers on other websites and some backlinks.
The good thing about this technique is the fact that you can launch the debate on other people's websites and blogs.
First thing first - you cannot go on a blog out of the blue and post a comment with a link. Serious and influential bloggers are very careful with spammy comments; if you come out of the blocks like this you will be moderated.
You need to gain the trust of the website/forum/blog webmaster where you are going to post. Start by posting some comments with no links or with links to articles which are on authority websites (government/official websites/official blogs).
Then when you have the trust of the blogger/webmaster/moderators, you can start to post a few comments your website link but Hey! don't post millions of them! Also make sure you link to pages which are relevant to the topic you commented about.