They help me quite a bit, and i see it everyday from technorati and from my statscounter. It's insane to see how many people actually link to you, and when I can, i most definitely return the love.
For example, I am getting link love today from a guest post here http://tinyurl.com/58hxmm
I think the more connections and relationships you form with other bloggers, the more they link to you, because they want to show everyone else how awesome they think you are:)
I am pretty new, but it seems like most of my traffic is coming from links on fellow bloggers pages! I like to think that at least some of them are going to come back again!