From Georgetown University Commons Knowledge Base
There are two major uses for links in a blog. One is to direct users to external websites or internal blog pages through basic in-text links. The other is to share favorite links to websites or other blogs in your sidebar.
To add a hyperlink to a URL, simply highlight the text you would like to have appear as a link and click the chain-link icon above the editing box. Paste in the URL to which you would like to link. An "http://" is already included by default in the URL box; be sure you do not duplicate it. Click "insert." You should see your new link appearing in blue/underlined. The link will be active when you update the page and access it from the public side of the blog.
Adding Sidebar Links
To add a link, go to the dashboard, and click the "Appearance" button on the left toolbar. Select the option "Menus."
Name your menu, then click, "Create Menu." This will create the heading under which links can appear in your sidebar. When your menu has been created, the "Custom Links" box becomes editable. Add your link here: type or copy/paste the desired URL, and label it as you wish it to appear on your site. Click "Add to Menu." You can add multiple links if necessary. When you have added the necessary link(s), click "Save Menu."
Now you must add the menu to your sidebar.
Click "Widgets" (under the "Appearance" tab).
Find the "Custom Menus" widget, and drag it to the "Main Sidebar" on the right. A box will appear where you can drop the widget. From the drop-down list, choose the menu you want to display, and type the name as you wish it to appear above the links. Click "Save." Return to your site to verify that your new links menu now appears in your sidebar.