Building quality links back to your website is crucial for high rankings in the SERPS. To get your link building started it is a good idea to submit your site for inclusion in directories.
A directory is a sorted, classified collection of resources, and a web directory has the added benefit of linking directly to the resource. A web directory is divided into categories and subcategories, placing an individual entry in an area with other similar and relevant entries.
DMOZ, the Open Directory Project is the single most important directory. It carries the extra weight due to several factors.
The Yahoo! Directory is another important directory. Much like DMOZ submissions are reviewed by humans, and web sites wishing to be included must meet some quality guidelines. A review for inclusion costs US$299 (nonrefundable), with a recurring annual fee of US$299 to maintain the listing. Inclusion is not guaranteed.
Beside these there are thousands upon thousands of directory sites, with different rules for inclusion. Some are completely free, some require a reciprocal link back, and some are fee based. Some are general, and others are focused on some particular topic. The quality of these directory sites vary. When chosing which directories to submit to remember that no links to your site can hurt you in the search engines (if that wasn't the case a company could bomb its competitor with "bad links" to hurt their rankings). So the only potential loss when submitting to a bad quality directory is your time, valuable as it may be.
No. Directories should be a part of your link bulding strategy, but they should not be your main focus. Go for the most important ones, and then pick a few quality directories focused on your topic.