Link exchange is the arrangement of adding a link to your website with the cooperation that the other website adds your link to their website. These types of links hold low value and people tried setting up linking farms where the links are not directly exchanged between two sites to trick the search engines but they got wind of that and can detect them as spammy links now.
If the two links between two websites relate to each other then it is not considered spammy but still, holds low value.