To begin with, lets know what a web directory is. A web directory is , as the name suggests, a directory of websites. It categorizes web sites and contains links to them.
Directories help new sites to take their first few steps in the vast world that is the internet. As you might know, search engines rank sites on basis on the number of back links, or inbound links. The greater the number of links from authority sites, the higher you move up in the results pages. The higher you move, the greater is the chance that you will start receiving visitors from the SE's for your chosen keywords. Submitting your sites to directories is thus a great way of gaining precious links.
Link Submissions to directories are of various types:
a.) Free submission
b.) Reciprocal Links
c.) Featured link
d.) Featured Home page link.
From looking at this, you might be tempted to say that free directories are the way to go. But a paid submission in a reputed directory can be of much greater weightage than say 100 free directories. Free directories do sometimes tend to look like link farms, and do not really have much credibility in the SE's. If the directory is free, there isn't much of a chance the owner would have gone that extra yard to promote his directory because of the spam that comes with it too. There are certain directories which use the no follow tag, submitting to whom won't be of any real use.
Most directories are human edited. Therefore a listing in a reputed directory would mean that your site is really worth visiting, which would therefore again increase traffic . Getting into directories like DMOZ and Yahoo therefore means a lot for the site owner.
So what are you waiting for?? Get ready, get submitting and reap the benefits.