A 'blog' (weblog) is a regularly updated webpage that has links to other websites with relevance to a certain subject. The popularity of blogs really soared years ago for a number of very good reasons, not least being that they seem to be able to boost your Google PageRank, your search engine results, raise your web profile, and increase visits to your website.
Blogs ideally contain a lot of keyword laden content, and therefore score highly with search engines. The fact that they are updated regularly with fresh content, often daily, means that search engine spiders crawl and index the site more often. The immediacy, and the up to date nature of the new content is appealing to site visitors, and therefore encourages repeat visits to your blog. Over time, this frequent readership can help you to develop a kind of familiarity and rapport with your blog readership, and this can develop into loyalty. Ultimately, interest in your main website is stimulated and blog visitors can become customers.
Providing so much up to the minute information can help you gain 'expert' status with your readership. This will help build trust, and it is well known that people prefer to do business with companies or individuals that they trust.
Blogs are generally written in a conversational, and not blatantly commercial style. This helps lend them credibility and enables you to give your blog, website and company a 'human' element. In a sense, this human element can help you put accross a little of your company values and brand personality in an unbiased way. This gives blog visitors a taste of what to expect of your service, and further builds trust.
Using the blog is often easier than trying to update your website, because it requires no coding or technical expertise - it's as easy to use as an e-mail. Feedback from visitors can be almost instantaneous which is good from a 'test and measure' point of view. Other bloggers also promote your blog by linking to any posts that may interest them or their readers - this amounts to free publicity. In fact, a blog provides cheap marketing for your website and business, and is a very powerful promotional vehicle, both on and offline.