Guest posting is beneficial to increasing your blog traffic in several ways. Let's first look at the situation if you are the guest blogger.
Being a Guest Blogger
When a blog owner contacts you and asks you to write a guest post, it is an excellent opportunity for you to grow your blog. First, when you write your post you are introducing yourself and your blog to a whole new group of readers. Second, your post will include a link back to your blog, which will help with page rank and your popularity with Google. As a result of this post, you have increased your followers, page views and hopefully page rank. Additionally, if you can post on a blog that has a higher page rank than yours, you can really enhance your position with Google.
Host a Guest Blogger
The first thing that inviting someone to be a guest blogger does is creates a great relationship with a fellow blogger. One thing I have learned about blogging is that everyone helps each other. In most cases, you will not find an "everyone for themselves attitude." Another benefit of a guest blogger is that your blog will have a post of great content. Second, the guest will more than likely create a link from their site to yours. Again, this is a benefit for page rank. This link will also bring the guest blogs readers to your blog.
So in conclusion, guest blogging is beneficial both when you are the guest blogger and when you are the host.