Annotations are wonderful for increasing engagement with your audience on YouTube by adding interactive commentary to your videos. By adding annotations to your YouTube videos, you are essentially placing calls to action within your video content, and potentially driving traffic to wherever you choose.
Before jumping in and adding annotations everywhere in all of your videos, you should search YouTube to find examples of what has worked well for others. There are tons of great creative uses for annotations out there, you just have to keep in mind the fact that it can get cluttered and confusing if they are not used appropriately. Here is a really creative example of what can be done with annotations. This company essentially built a website using multiple videos and annotations.
There are some general guidelines and best practices for using annotations in your YouTube videos. You should always be conscious of the text size you are using. If the text is too small, your message may get lost, literally. Also, you should keep color combinations in mind for legibility purposes. In general, you want to make things simple for your viewers by giving them friendly, non-invasive reminders, linking them to something they may want to see. Below are some good uses for annotations:
Linking to your YouTube channel
Linking to other (related) videos
Video response links