A link farm refers to a website that is composed of long lists of websites that link to one another.
Link farms increase the number of inbound links to sites in order to improve ranking in search engines.
However, search engines consider link farms or link farming as spam. Sites which are included in link farms will be penalized by search engines. Link farms will surely give you a lot of links, but those will most likely be coming from unrelated sites. Instead of participating in link farming, get inbound links the right way. Target relevant sites to improve your site's ranking.