Definition - Internal Link

An internal link is exactly what it sounds like — a link within your website. In other words, it's a link from one page of your website to another page of your website.

For clarification, the other main types of links are external (a link pointing off your site) and inbound (a link pointing into your site).

Internal links are what make up your website's navigation. They also play a big role in both the usability and visibility of your website. Internal links are important to search engine optimization in two primary ways:

First, a good internal linking structure will help search engines find and index more of your web pages. This is important, because if a search engine only finds a small portion of your web pages, that's all you're going to be ranked on. The more content you can give search engines, the higher you'll rank (with all other factors being equal).
Secondly, certain types of internal links can actually tell search engines what your website is about. For instance, search engines can read the text within a plain text hyperlink and will match it up against the resulting page. This increases your relevancy (and possibly your ranking) for that key phrase.