Linking to relevany blogs

Hi there!

I am fairly new to the blog world and I was hoping someone could help me.
I found one of my posts linked to on another blog which was great and I was wondering how this is done automatically. Is this done by RSS?

I want to set-up the same on my blog and I am not sure how to do it.

The blog that linked to me had posts that had links to other blogs with similar info.

Thanks.
KMC