Don’t underline words if they’re not links.
On the web, something that’s underlined is supposed to be a link. If you underline gratuitously, readers will be annoyed when they try to click those underlined words only to discover that they’re not really links. If you want to emphasize something, use italics instead (or boldface, or another color).
Make links blue or underlined, or both.
Users expect links in body copy to be blue and underlined, because that’s the way they appear on 99% of other websites. If you use a different color then at least the underline is a clue that a link is a link. Likewise, if you remove the underline but keep the link blue, then the color is the clue that a link is a link. So it’s best to use both blue and underlined, but using at least one or the other is acceptable.
What’s wrong is doing neither — having links that aren’t blue and aren’t underlined. How are users supposed to know what’s a link at that point? I ran across one page (no longer up) whose main link is red with no underline. To make matters worse, elsewhere on the page they use blue text, which looks like a link, but which isn’t. So users had no clue that the link was actually a link, and there was other text that looked like a link, but wasn’t. (I tried to bring this to the attention of the site owner but he bragged that nobody else had ever complained.)
Links in menus don’t have to be blue or underlined, as long as they’re clearly menu items. The blue/underlined tip is for links that are in the middle of the page.
Explain what you’re linking to.
When you’re able to provide more information about what a link points to, do so. For example, if your site has a Links page, include a short description of each site you link to, say 1-5 sentences. That way visitors have an idea of what’s on those sites, which will help them make their decision on whether to visit those sites, and help them find what they’re looking for, while avoiding what they’re not looking for.
Nothing is less useful than a whole bunch of links to other sites when those links consist of nothing more than the names of those sites (or worse, the urls). Without any description of what you’re linking to, readers are forced to visit each and every site to get an idea of what’s there. Imagine 100 of your visitors all repeating that same laborious surfing, needlessly. You could have told them what’s on those sites, because you (presumably) visited those sites yourself, so you know what’s on them. Do your readers a favor and share your knowledge with them. [Example site]
Don’t open internal links in a new window.
The owner of a site I just ran across thinks it’s a good idea to pop up a brand new window when a visitor clicks a link within his site, but that only annoys users when they suddenly have a gazillion windows open on their screen. Opening new windows for external links to other sites is fine, but links within a site should always open in the same window. Visitors can still get around your site just fine when links open in the same window, because you did include a good navigation menu at the top or the left of the page as in tip F1 above, right? Opening new windows means that after five clicks within your site, your visitor’s screen is cluttered with six different windows.
Use descriptive link text.
The text of a link should describe what’s being linked to. You should never, ever use words like “link” or “here” or “click here” as the link text. Readers prefer to scan web pages rather than read every word, and you make that impossible if you use generic, non-descriptive words as the link text.