What is Natural Link Building ?

[vienchaua10]

I'm trying to better understand what is meant by a natural link and would appreciate any assistance.

Doing some competitor link analysis I've noticed a web developer who has created a directory for all its customers. This is not a directory in the traditional sense of being of use to an end user, but to my untrained eyes, it looks like an internal directory used solely for the purpose of link building. For all I know this might be perfectly good practice in the industry, but as a beginner, I'm attempting to get an understanding of things.

My question is, what precisely is meant by a natural link? If the above scenario is all ok, whereby there are businesses in the same field of work, but ultimately could be in any given location, on a directory, are they natural links? Do these kind of directories that don't service an end user, exist if the common feature between them is say location only, or an seo agency only?

Appreciate I could be completely out of kilter on this, but it seems the benefit on SERPs is pretty significant for something that seems pretty "unnatural" to me?

Any guidance would be appreciated...tom