A three-way link exchange refers to a kind of reciprocal link exchange among three domains instead of two. A reciprocal link exchange that is so popular today among webmasters is mostly a two-way linking.
To make reciprocal links look more �natural�, you can try a three-way link exchange.
In normal reciprocal link exchange, you and your link partner exchange links with each other. Search engines can easily find that out. So, if you have many reciprocal links going in and out, each linking may not be weighed for the maximum value; thus your website may not increase PageRank faster.
In a three-way link exchange, three different domains must be involved. For example, site A links to site B, but not B to A. So, site B is only receiving a one-way link from site A and NOT linking back to it. Likewise, site C and site A are linked from one site but not linking back. Instead, site C and A are simply reciprocal-linking to different domains.
The way to create more natural links in a three-way link exchange is done by using a set of three one-way links. A, B, and C are only receiving one-way links, and they do not directly link back.
source:maheshkukreja.com/what-is-a-3-way-link-exchange