Internal linking is important in SEO, it’s often not taken as seriously as maybe it should be.  Within your site it is advised to have each page with different keywords.  By internally linking to a specific page using the anchor text of the main keyword of that page you are letting the search engine know what that page is about.

 Hopefully you will then have outside websites linking to that page with that anchor text too, the search engine will then get a good picture of what that page is about and be able to deem how relevant that page is by the amount of outside links it receives.  It is actually quite simple.  Search engines need to know what a particular page is about and you are helping them. 

Of course, this internal linking compliments on page optimization but it is extremely good practice to do.  Linking in this way can also be beneficial for human readers of your site.  Links that are clearly labelled what they lead your website visitor to, help the user experience.  In the end this is normally the most important factor, SEO is just a means of getting what you want.  After getting the amount of traffic you set out to, you then want visitors to be happy with your site.