Any link on your website which is not same as website root url is considered as Externam URL or External Link. Linking of good external pages is considered as good habit. Suppose you are writing about Life insurance and then you found a great post on how you can calculate your savings on life insurance and if you are linking to that page then it will help both sites. Since you are helping your readers in solving their issues by referring to additional article, it is considered as good karma.
But don't misuse this and link to any url. Many people are using this in link exchange which is totally wrong. Link exchange is now having negative impact and can reduce your ranking and even penalize your website.