A couple of articles offering some very good advice on what makes effective link text.
Links are at the core of what the web is about. When I observe website visitors in user testing sessions, they're often the root cause of the problems they encounter.
Well written links are critical for good usability, accessibility and search engine optimisation.
If you write web content, you should have most of these points at the forefront of your mind.
The only point I'd disagree with is Trenton Moss's "limit links to four words". I've seen research from Jared Spool which suggests the most effective link text is typically longer than this. And I've seen first hand how poorly one- and two-word link text can perform.
While I think it always depends, for me four words would usually be the minimum for in-page link text and a few more words will generally bring more clarity. So long as the most important words are the first two or three.
Editorial Style for Inline Links - article for meetcontent.com by Rick Allen
Writing effective link text - artilce for webcredible by Trenton Moss