Several names can be associated with a inode. The inode contains a field containing the number associated with the file. Adding a link simply consists in creating a directory entry, where the inode number points to the inode, and in incrementing the links count in the inode. When a link is deleted, i.e. when one uses the rm command to remove a filename, the kernel decrements the links count and deallocates the inode if this count becomes zero. Another kind of links exists in most Unix filesystems.
Symbolic links are simply files which contain a filename.
When the kernel encounters a symbolic link during a pathname to inode conversion, it replaces the name of the link by its contents, i.e. the name of the target file, and restarts the pathname interpretation. Since a symbolic link does not point to an inode, it is possible to create cross-filesystems symbolic links. Symbolic links can point to any type of file, even on nonexistent files. Symbolic links are very useful because they don't have the limitations associated to hard links. However, they use some disk space, allocated for their inode and their data blocks, and cause an overhead in the pathname to inode conversion because the kernel has to restart the name interpretation when it encounters a symbolic link.