Student and graduate "internships" are very important, because they substantially increase the chance of graduates finding employment. To an employer, a candidate who has spent time working for a firm within a particular industry shows dedication to a particular career, enthusiasm for a particular job and importantly, has experience.
Internships are also very useful to interns themselves as they offer the chance to find out what working for a particular company, or within a certain industry, is really like. Internships also allow interns to make contacts with managers and recruiters, which can later be used to negotiate full-time employment.
Companies also usually pay interns for their time during an internship, and salaries can be very good indeed. The highest recorded pay for an internship in 2008 was £800 a week, offered to interns at BarCap.
Internships can be highly competitive, in fact most internships receive more applications than employer's graduate schemes themselves. Often candidates are required to visit companies for interviews and/or assessment days where they must impress recruiters sufficiently in order to be offered the internship.
It is not unusual for graduates to return to the organisation who hired them as an intern, for full-time employment. Graduate recruitment surveys have found that almost half of all employers convert at least a fifth of their interns into permanent staff members.