Directories are often over emphasized - "they are the most important part of your website promotion", or under utilized - "I don't know any directories other than Dmoz or Yahoo so I'll just submit to them and see what happens".

The role directories can play lies somewhere in the middle. I like to use them as the backbone of my link building strategy. The reasons for this are simple:

1. If you choose right they generally always accept your website - there's not many things quite as frustrating as sending out 100 link requests and only hearing back from 10!

2. Their pages are optimized around a certain theme - this means that the page title and the rest of the content on the actual page your link ends up on will often correspond with the theme of your website.

3. Many directories have good Page Rank (4+) which implies good link popularity.

4. The people who build directories "generally" understand SEO and so limit the number of links on a page to 20 at the most - useful for passing Page Rank.

5. Niche directories can be a good source of direct traffic and assist your branding efforts in your particular market.

6. If you're willing to spend a little bit of money the turn around time of getting accepted is normally only a few days.

7. Many directories allow flexibility in the anchor text of your link - for example my link could be Make Money With Adsense, rather than just my domain name - Understanding Adsense. This is important in telling the search engines what your website is about and improving your rankings for your target keywords.

This is only a summary of the good points. There are thousands of directories online, many of which have been set up purely to take a submission fee from unsuspecting website owners. A proper strategy is fundamental to successful directory submission. A good starting point is my website Which Directories.