Simply put, when you make a hyperlink like this <–That is the anchor text. It’s the (often blue) clickable linked text.
“Words are the means for meaning”, and Google certainly understands that what words we choose to link to other websites is an editorial decision for a destination and can reflect the relevance of the page you link to, both internally on your site and “externally” to other sites. See most logical site owners won’t make hyperlinks on words that mismatch their destination, mostly, but may forget to update “click here” to something actually communicating value. So there is potential signals to pass to Google on your anchor text.