An external or outbound link is a link from a page on x domain page to a page on y domain. For example, a link from searchenginejournal.com/google to google.com/about-us
It was considered that external links to authority sites added value to a page because it demonstrates that the page is well-researched and is using trusted sources.
External links are not considered to have any influence on ranking and should only be used to cite sources where relevant.