A web directory is basically a series of webpages, categorizing links to other webpages.
In most of free directory lists, available on the internet, the web directories are ordered by their PR. However, PR is still playing a significant role, but it is just one, from the 2000 factors that google use in his algoritm. Read this article for more informations about the "death" of pagerank.

Free web directories
By submitting your site to free web directories, you can aquire a significant quantity of on-way links to your site.
It is not recommended to submit your site to hundred of free directories. It is much better to create a reletive small list of free, but quality directories, and submit your site to them.

It is reccomended to submit your site to dmoz.org - the most important free directory (edited by volunteers) , but probably you never get in.

Paid/Trusted web directories
Gettings listed in some trusted directories, can be more effective than getting listed in 100 another.
Here is a list with some paid and trusted web directories.