A link farm is a website (or collection of websites) developed exclusively for the goal of boosting the number of inbound links to another website.
For instance, if the New York Times links to a website rather than IthacaSlowLorisEnthusiasts.com, that website is probably of higher quality. The New York Times website is also clearly of higher quality than the latter one because it is linked to a far larger number of websites. This concept is used by link farms.