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What is back-link Analysis, and how it is effective?

I heard many times in my career that do a Back-link analysis, it is positively effective for any SEO, I just want to know, that how to do back-link analysis and how to use it effectively?

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SEO

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@kpkarthikMar 28.2014 — Backlink Analysis means optimize your website backlinks details or your competitor website's backlinks details with the help of online backlink checker tool.It help to know the value of your and your competitor's backlinks and those link building methods.
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@kaushalshahMar 29.2014 — Backlink analysis help you in finding your competitors backlinks, anchor text, source...from those backlinks find strong backlinks and built for your website which will help your website.
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