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If your site isn't going to show up in the search engines until people start linking to you, and no one is going to link to you until they know your site exists ... which will be when the search engines start showing you...
Is the only way to get your site known to pay someone to advertise your site?
What are some other ways to get you site started up?
You do not have to have links to your site to return on search results. It is however one of the heavier things Google and other search engines look at to rate your site higher.
Also, there are a number of sites you can add your domain to that will help. Specifically, I would suggest http://www.dmoz.org as that will help some with a link and Google does look at them pretty heavily.
Also, your site will do better in long-tail searches than popular searches if it is new. What I mean by that is, if you make a site about Britney Spears you will have a lot of competition and it will be hard for your site to get first page listings. However, if you have a site that talks about something very specific like specific kind of car or motor or something that there are not as many searches on you will be able to get into the top page and even the number 1 spot much more quickly, even without links to your site. You can find out what words are and aren't being searched by using Google Keywords.
One thing to mention. You will want to sign up for a Google Webmaster account for you site. Checkout https://www.google.com/webmasters/tools. Once you have an account for your domain that will help Google find it since if no one links to you Google has no other way to know you exist.
It really isn't as much of a chicken/egg problem as it used to be. I have found that spending some time on a quality design and at least half a dozen pages of good content pays off. Launch, then keep more content coming.
The first thing to do is get your site map submitted so that search engines know you exist. Remember, search engines are psychic and know you exist anyway, even before a single link to your domain appears anywhere, but getting the site map in really helps to start drawing a little bit of traffic.
The next thing to do is go out and promote your web site. This means being helpful / like-able on forums, blogs, etc and taking advantage of your signature link. If you take a few minutes and actually add something to a conversation, your comments / posts will generally get approved.
A lot of blogs turn off nofollow links (mine do) for people that leave comments that are of sufficient quality to be approved. That really helps.
You can then consider what you want to spend to speed up a process that (should) occur naturally over the next six months. If you sell stuff, yes, its a good idea to get your banners out on sites that have visitors that would like your products.
Another good example is SO advertisers. If you make a 'killer' IDE, you're just one of many. You need to get marketing in front of people that would appreciate what you offer, and you've got a 200x200 block space to convince them its indeed 'killer'.
Personally, I like being patient and waiting for the 'organic' method to work its magic prior to spending money on any kind of paid campaign, especially with social media sites being so conducive to self promotion.
No, you can show up on search engines without links to your site (at least for Google, I can't verify for the others). One way to do this is to use an XML Sitemap sent to Google through their webmaster tools. Bing and Yahoo also have similar services.
Also, you can setup a Twitter account to provide some links to your site. Also Facebook and other social networking sites are great ways to let people know about your site.
Let the people you know about your site. This is probably the best way of getting it out there since they will trust you versus random people on the internet. These people will in turn let their friends know and so starts the viral marketing.
But, the first thing is to make sure you have amazing content. The better the content, the higher search engines will rank you. If you don't have great content, then you might as well shut down the site.
Lastly, yes, purchasing advertising is a way of generating traffic. But it should be used in conjunction with everything else. If it's the only thing you do, don't expect your site to be hugely successful.
