Contextual links are clickable pieces of text within the article that redirects users to another page. It can link to pages either within the same site or on other websites.
Contextual links are essential for your website’s performance in two ways. Firstly, you can drastically improve your SEO. Search engines think that if other sources are linking to you, you are a reliable source of information. Consequently, it will rank you higher. Secondly, it just drives traffic to your page because users click on the clickable text.
If it is about internal linking, it helps users to navigate the pages and stay on the website longer which can also improve your ranking.
However, you should pay attention to what websites are giving you contextual links. Avoid spam, low-quality websites, or those with inappropriate content. It may spoil your brand reputation and give you a penalty from search engines.
It is especially important in contextual links to use good context and anchor text. You probably should avoid links to car engines in the article about software development. It is also not the best idea to put anchor text that is absolutely irrelevant to the page it is linking to.