Yes, you need to build links to your site to acquire more PageRank, or Google ‘juice’ – or what we now call domain authority or trust. Google is a link-based search engine – it does not quite understand ‘good’ or ‘quality’ content – but it does understand ‘popular’ content. It can also usually identify poor, or THIN CONTENT – and it penalises your site for that – or – at least – it takes away the traffic you once had with an algorithm change. Google doesn’t like calling actions the take a ‘penalty’ – it doesn’t look good. They blame your ranking drops on their engineers getting better at identifying quality content or links, or the inverse – low-quality content and unnatural links. If they do take action your site for paid links – they call this a ‘Manual Action’ and you will get notified about it in Webmaster Tools if you sign up.
Another excellent guide is Google’s “Search Engine Optimization Starter Guide.” This is a free PDF download that covers basic tips that Google provides to its own employees on how to get listed. You’ll find it here. Also well worth checking out is Moz’s “Beginner’s Guide To SEO,” which you’ll find here, and the SEO Success Pyramid from Small Business Search Marketing.