SEO is the process of optimizing your web site for the purpose of getting free traffic from search engines. An optimized web site is more easily understood by Search engine crawlers, so there are more chances of ranking higher in SERPS.
SEM is the marketing process with a goal of getting more...
Anchor text is the clickable text in a hyperlink. SEO best practices dictate that anchor text be relevant to the page you're linking to, rather than generic text.