A directory is a list of websites that have been categorized, usually by humans. For SEO it’s very easy to get inbound links from directories. One can usually get a free inbound link by submitting their website. Some directories require reciprocal links, but one should be careful is linking back to websites. If you link to so-called bad neighborhoods your site may be punished. Check if the directory has not been banned from google (the PR bar in your Google-bar is grey if a site has been banned).
Other directories require payment for inclusion. Consider the PR of the directory, the directories relevancy and your budget before paying them.

Several directories, like DMOZ are trusted by Google and getting listed here is very important for your website SEO.

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