Also known as link juice, it is the value one page provides to another by providing a follow backlink. It can come from both internal and external links.
Link equity is tied to the PageRank algorithm. PageRank works by counting the number and quality of links to a page to determine a rough estimate of how important the website is. The underlying assumption is that more important websites are likely to receive more links from other websites.
Factors like link relevance, overall authority of linking page and website and the placement of the link influence link equity.