In HTML, anchor text refers to any text wrapped in HTML anchor tags. Anchor tags are used to designate hyperlinks, or links, on a web page. Anchor tags can be used to link a variety of web page elements to other web pages or web sites. When anchor tags are used on text, they are more useful to search engine crawlers.
The text found between the opening and closing anchor tags is called the anchor text, and is used by search engines to determine the topic or content of the page being linked to.
For example, if you have a web site about cars, and five people are linking the word "cars" to your web site from their web site, this will give your cars related web site more credibility for your topic. If, rather than "cars," those five people are linking the word "cats" to your web site, the anchor text will be misleading to the search engines, instead of helpful.
It is a good idea to whenever possible, have relevant and descriptive anchor text, to best leverage the search engines.