When someone offers to exchange links with you they want you to add them to your blogroll. In response, they will add you to their blogroll. These links are also called reciprocal links.
Before you agree to exchange links be sure to look over the new blog. Are you comfortable with the content? Does the content fit with your blog and those on your blogroll? You are linking to this blog and many visitors take that as endorsement. It is absolutely appropriate for you to decline such an invitation (for example, "I like to keep my blogroll short" or "I only add people to blogroll when I’ve been reading them for several months", etc.).
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