hard link vs soft link

Inodes are associated with precisely one directory entry at a time. However, with hard links it is possible to associate multiple directory entries with a single inode. To create a hard link use ln command as follows:
# ln /root/file1 /root/file2
# ls -l
Above commands create a link to file1. Symbolic links refer to:

A symbolic path indicating the abstract location of another file.

Hard links refer to:

The specific location of physical data.

Hard link vs. Soft link in Linux or UNIX

• Hard links cannot link directories.
• Cannot cross file system boundaries.

Soft or symbolic links are just like hard links. It allows to associate multiple filenames with a single file. However, symbolic links allows:

• To create links between directories.
• Can cross file system boundaries.

These links behave differently when the source of the link is moved or removed.

• Symbolic links are not updated.
• Hard links always refer to the source, even if moved or removed.

How do I create symbolic link?

You can create symbolic link with ln command:
$ ln -s /path/to/file1.txt /path/to/file2.txt
$ ls -ali
Above command will create a symbolic link to file1.txt.

Task: Symbolic link creation and deletion

Let us create a directory called foo, enter:
$ mkdir foo
$ cd foo
Copy /etc/resolv.conf file, enter:
$ cp /etc/resolv.conf .
View inode number, enter:
$ ls -ali
Sample output:

total 152
1048600 drwxr-xr-x   2 vivek vivek   4096 2008-12-09 20:19 .
1015809 drwxrwxrwt 220 root  root  143360 2008-12-09 20:19 ..
1048601 -rwxr-xr-x   1 vivek vivek    129 2008-12-09 20:19 resolv.conf

Now create soft link to resolv.conf, enter:
$ ln -s resolv.conf alink.conf
$ ls -ali

Sample output:

total 152
1048600 drwxr-xr-x   2 vivek vivek   4096 2008-12-09 20:24 .
1015809 drwxrwxrwt 220 root  root  143360 2008-12-09 20:19 ..
1048602 lrwxrwxrwx   1 vivek vivek     11 2008-12-09 20:24 alink.conf -> resolv.conf
1048601 -rwxr-xr-x   1 vivek vivek    129 2008-12-09 20:19 resolv.conf

The reference count of the directory has not changed (total 152). Our symbolic (soft) link is stored in a different inode than the text file (1048602). The information stored in resolv.conf is accessible through the alink.conf file. If we delete the text file resolv.conf, alink.conf becomes a broken link and our data is lost:
$ rm resolv.conf
$ ls -ali
If alink.conf was a hard link, our data would still be accessible through alink.conf. Also, if you delete the soft link itself, the data would still be there. Read man page of ln for more information.