Online directories, also known as business listings, are online versions of those printed Yellow Pages that use to show up on your doorstep. Most online directories are website submission services that let you list your business information and link back to your website. Your business being added to online directories makes you more visible online. The more listings you create, the better chance you have of customers finding you.
Listings in online directories are factors in the ranking algorithms used by Google and other search engines to create search engine results. A business that manages its online directories listings, ensuring they are complete and correct, will (if all other factors are equal) rank higher than a business with less. Ranking high in search results is highly dependent on search engines being able to confirm your correct contact information and properly categorize your business.
Different than backlinks or link building, business listings don’t need to link back to your website to matter. Search engines are using this information in the context of confirming that your business is, in fact, a legitimate business and should be recognized, and even promoted, as such.