Residual error is the measure of the fit between the true locations and the transformed locations of the output control points. If there is a link with a high level of error, consider deleting it by highlighting the point in the link table and clicking the delete icon.
Depending on the number of control points you have, from the Georeferencing table you can perform either a 1st, 2nd, or 3rd order transformation. The transformations compare the coordinates of the source image with the control points creating two least-square-fit equations to translate the image coordinates into map coordinates.
A 1st order transformation shifts the image up, down, right, or left, stretches the image larger or smaller, or rotates the entire image.
The 2nd and 3rd order transformations fit higher order polynomial equations to the data, allowing points to be shifted in a non-uniform manner.
Most of the time either a 1st or 2nd order will suffice. Try all three and choose the one that works best.