An external link is a hyperlink that points from a page on your website to a URL that is located on a completely different domain. Any link that leaves the boundaries of the main domain is classified as an external link.
Conceptually, external links serve as citations and sources in the digital environment. When a site links to an external resource, it demonstrates its depth of research and its ability to provide the user with additional context from reliable sources. Linking to authoritative and high-quality external resources signals to search engines that the content is well-researched and trustworthy, which indirectly helps your own ranking.
The key difference between an external link and an inbound link is the direction: an external link is an outbound referral from your site to another, while an inbound link is a referral directed to your site.